Step right up folks. It's the main event. In this corner we have ... Coinbase, the company everybody loves to hate despite the positive things they have done in the industry ... and in this corner we have ... the I. R. S., the agency everybody just flat out hates.
This ought to go the full twelves rounds even though it shouldn't last more than one.
The Internal Revenue Service has filed a petition to attempt to have the courts force Coinbase to turn over basically all of their records for all of their United States based customers for years 2013 through 2015.
No. They didn't name specifically who they were investigating. They didn't give a time-frame when the suspected individuals of whom they couldn't name conducted a transaction of which they couldn't list, beyond vast blanket of two year.
They want everything. Everything on everyone so they can dig through the data and see if there's anything they can charge someone with.
Crossing the Line
The IRS has crossed the line here. Sure, they have a right to know what every tax payer earned. Their sister agency FinCEN (Financial Crime Enforcement Network) has a right to know about large cash transactions and all suspicious financial activity and if there's a valid reason with suspects the agencies can actually name in an effort to fight terrorism and other harmful criminal activity, then sure they need some information that most likely Coinbase would be happy to provide.
None of that applies here. They just want everything on everyone. They have zero right to monitor consumer spending, financial trading, market strategies, merchant habits, and numerous other data that would be available if they were to just "hand it all over".
Not to mention that the United States says the bitcoin is not money. Thus the IRS is asking to know what property is owned by whom and expects Coinbase to just shovel it over in violation of every single customers privacy during that time period.
Let's also recall, the IRS didn't say a damn thing about bitcoin until 2014. They had 5 years to start "looking into things" and didn't, now they want data from a year before they even threw their hat into the ring.
Coinbase Doing Things Right
Coinbase is in the right to fight this. Not only is it the right thing to do, anything otherwise could certainly be illegal. It's not illegal for the IRS to ask, but it could land Coinbase in a world of trouble with all of these customers in the event of a violation of their privacy.
This is just like the government asking Apple to hack provide them a backdoor into the iPhone.In both cases, the government is just plain wrong and hopefully Coinbase sticks to their guns on this one.
Look, I'm all for helping shutdown major evil and keeping people out of harms way. Hell, that's what this platform is all about to begin with. However, you don't punish the majority to check on the possible wrong-doings of a few. That's just plain wrong and just as harmful if not more so than any crime they may or may not find from these individuals they may or may not even know about..
That said, they're not even looking into that. They're trying to figure out who hasn't paid their bill.
IN THE MATTER OF THE TAXLIABILITIES OF:JOHN DOES, United States persons who, at any time during the period January 1, 2013, through December 31, 2015, conducted transactions in a convertible virtual currency as defined in IRS Notice 2014-21.
That's the actual text from the petition and note the 2014 in the IRS notice. Yeah they want stuff from a year before they said it was something so they can say someone did something wrong when they didn't even consider it something wrong until the following year.
Perhaps the IRS needs to learn how to navigate the blockchain and do their damn job instead of asking US based corporations to illegally violate tax-payer privacy. This is ridiculous.
Apparently Coinbase thinks so as well. According to their blog they plan to hand this information over kicking and screaming. However, all they need is an average attorney because there's plenty a legal ground to make a stance on with this one.