In the latest development regarding rulings in the digital asset exchange Kraken courts, the exchange announced that it will send client data to the United States agency responsible for the collection of federal taxes, the Internal Revenue Service (IRS), starting in November.
The decision was revealed after the firm lost a lengthy legal battle with the regulator that began in May 2021.
A Kraken Letter Surfaces on Reddit
A letter surfaced on social networking platform Reddit earlier this week, which revealed that Kraken has to submit client information. This comes at a time when authorities are increasing their efforts to gather data belonging to blockchain-based transactions.
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Interestingly, Kraken was summoned by the IRS in May 2021, and the agency asked for a huge range of information from the exchange belonging to its clients. The digital asset trading platform argued, stating that it had vowed to maintain the privacy of its clients. Following a lengthy litigation process, Kraken was able to reduce the number of clients affected.
Additionally, the court ordered the exchange to hand over information and transaction histories for clients who had transactions above $20,000 in any year between 2016 and 2020. This makes it one of the largest attempts by a US agency to retrieve data on blockchains. Further, Kraken will produce client data like names, dates of birth, tax identification numbers, addresses, contact information, and transaction histories for the specified years to the IRS.
A reddit user stated:
“This reporting law imposes not only a burden on Kraken but also on other companies to report on their users. But, more importantly, it empowers the IRS to search these records and figure out who has not paid their taxes or incorrectly stated them. This is bad on so many levels. Will they find some tax evaders? Probably. However, the government will spend more—a lot more—than they can ever hope to recover from the taxes collected from those who did not pay initially.”
Expansion Outside the U.S.
Kraken has recommended that its clients should consult with tax advisors to figure out their tax liability and report the correct information to the IRS. As per earlier reports, Kraken announced expansion in the European Union (EU) with the acquisition of the Netherlands-based Bitcoin trading platform, Coin Meester B.V. (BCM). Other exchanges have also started to shift their focus outside the United States owing to the strict regulatory framework.
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Kraken also seeks to increase its presence in the United Kingdom and recently onboarded a new head for its UK operations, Bivu Das, as reported earlier this week by Bloomberg.