Kraken ordered to provide user data to IRS

Exchanges must hand over the data of users who trade $20,000 a year.

Kraken has been ordered to provide information about its users to the Internal Revenue Service (IRS), according to a June 30 court filing.

Users with a transaction volume of $20,000 are affected

Kraken must provide the IRS with the identities of users who have traded at least $20,000 worth of cryptocurrency within a year, which applies to users who were active between Jan. 1, 2016, and Dec. 31, 2020, the documents said.

The court ruled that Kraken must share certain information, such as usernames, dates of birth, tax ID numbers, addresses and contact information.

Among other things, the court acknowledged that the Kraken government’s information request was too broad. Notably, it believes the tax agency’s requirements for KYC/AML data, as well as information on users’ employment, net worth and source of wealth, are too broad. As such, Kraken has not been required to provide that data to the IRS.

In addition to providing user information, Kraken must also provide certain on-chain information, such as transaction hashes and blockchain addresses. Kraken has to provide an account’s blockchain data volume for a “chain split” or hard fork, which could affect user holdings but is not fully observed in Kraken’s records.

Finally, Kraken must provide certain transaction records, records that have not been found to fall under the government’s overly broad requirements.

The IRS has been looking for Kraken data for years

The IRS has been trying to obtain Kraken’s user records since at least May 2021, when it was allowed to issue a subpoena to the exchange. The current case began in February 2023 after officials began trying to enforce the 2021 subpoena.

The tax agency has previously gained access to customer data from other crypto platforms such as Coinbase, Circle and SFOX.

Recent surveys have shown that even if rules exist, the vast majority of cryptocurrency investors do not pay taxes on their investments and gains. Various IRS actions targeting cryptocurrency exchanges are undoubtedly aimed at combating this phenomenon.