A Judge Just Cleared the Way for the IRS to Seek Coinbase Customer Data
Looking at the demographics of our client base, there probably aren’t too many of you that remember the Sergio Leone 1966 epic film, “The Good, the Bad and the Ugly”. Unless, that is, you were raised on a healthy diet of Westerns (aka Cowboy films) as a child like I was. I can hear you asking what on earth does Clint Eastwood (who was ‘The Good’ by the way) have to do with Coinbase and the IRS? Well, I thought it may be good to look at this story and extract what I believe is good, bad and just plain ugly. So, saddle up for the ride cowboys (and girls)…
Like a Shetland pony, this is going to be quiet short. I suppose you could argue that the very fact the IRS is now interested in bitcoin to this extent just proves how far bitcoin has come over recent years. From a wacky idea for techies, to a stubborn gunslinger that just won’t die, to a global virtual currency that is now firmly on the radar of the IRS, bitcoin is here to stay. Also, given that there is no such thing as bad PR (although Coinbase may have a different opinion in this particular instance, I guess), this news story is certain to make more people aware of bitcoin. Not a bad thing.
I’d be happy to bet a fist full of dollars (you cowboys will get that pun) that there is a large section of the bitcoin community that see this as a further erosion of precious anonymity. So, on the face of it, this is a very bad thing. However, if I’m wearing my sheriff’s badge, if you are evading tax then the simple fact you are using bitcoin to do it shouldn’t make you immune from capture or prosecution. Pay your duties cowboys. Oh, and if you thought this would never happen, then forgive me, but you have probably been a little short sighted. The more bitcoin becomes mainstream, the more we can all expect great Government scrutiny and regulatory interventions like this one from the IRS.
Okay, let’s get down to the nitty gritty. The fact the IRS is seemingly wanting data on every Coinbase customer, regardless of any suspicious of tax evasion, strikes me as a gross invasion of privacy. Why should everybody be rounded up and treated with suspicious due to the actions of a few? It has been reported that the IRS is requesting years’ worth of data on every US customer of Coinbase. I wonder whether they would do this for all the clients of CitiBank if they had a client that was suspected of tax evasion? Perhaps the heavy handed action is in response to veiled criticism from the agency’s own Inspector General who recently said in a report:
The IRS needs to ensure that it develops a strategic plan that includes management oversight as well as adequate internal controls for its virtual currency programs. Until a comprehensive virtual currency strategy is developed, the IRS is open to the risk that undetected noncompliance of virtual currency taxable transactions will result in an increase to the Tax Gap.
Their treatment of Coinbase strikes me as kneejerk and reactive rather than strategic. It remains to be seen how this particular gunfight plays out. One thing is for sure, the IRS has more pistols than the frontier folks at Coinbase.
What effect does it have on CoinCorner?
Short answer, very little, as we don’t currently accept US customers so we don’t expect any IRS sheriffs knocking on our door any time soon.
It’s yet another sign that Bitcoin is finally leaving the Wild West behind it.
Disclaimer: The views and opinions expressed here represent those of the contributor, not necessarily those of CoinCorner.