Bitcoin investors aren’t the main ones who plan to cash out from the crypto currency blast. Uncle Sam is currently set to gather reports from several clients of a digital currency trade who neglected to report bitcoin transactions. In a decision on Tuesday, a government court judge requested San Francisco-based Coinbase to conform to a summons to report 14,355 records, which represent almost 9 million transactions.
The ruling has already proven controversial in the Bitcoin world. “We remain deeply unsatisfied with the lack of justification provided by the IRS,” Coin Center’s Peter Van Valkenburgh told The Verge. “Without better rationale for why these specific transactions were suspect, a similarly sweeping request could be made for customer data from any financial institution. It sets a bad precedent for financial privacy.”
The order, which covers exchanges in 2013 and 2015, comes after a drawn-out court battle that started when IRS officials requested Coinbase give specific individual data of more than a million client accounts. The IRS restricted its request to accounts that contained bitcoin exchanges—either trading bitcoin for dollars, or sending or getting coins from another bitcoin client—worth $20,000 or more.
“The summons as narrowed by the Court serves the IRS’s legitimate purpose of investigating Coinbase account holders who may not have paid federal taxes on their virtual currency profits,” wrote U.S. District Judge Jacqueline Corley.
The inquiry started after the IRS looked through its electronic filings and found that 802 individuals had proclaimed bitcoin-related losses or profits in 2015. Amid the three years secured by the IRS request, the cost of bitcoin rose from $13 to over $1,100. The currency this week broke $11,000 out of nowhere. The IRS investigation into Coinbase is probably going to be just the beginning of a drawn-out strategy by the government to guarantee digital currency investors pay their taxes.
Coinbase had vigorously opposed the order on similar grounds. “We were proud to appear in court today… to continue to fight against what we believe to be government overreach,” Coinbase’s David Farmer wrote after a hearing earlier this month. “In the future we hope to work with the IRS to establish a reasonable tax reporting method that makes sense for virtual currency service providers and consumers alike.”