Cryptocurrency exchange Kraken is taking to court the fight against the United States Internal Revenue Service and its demand to present critical information of the users of the platform. The exchange deemed the IRS’s demand for customer information an “unwarranted treasure hunt.”
The exchange has asked a federal court in San Francisco to intervene in the matter and ask the IRS to back down, Bloomberg reported. Kraken’s rejection against the IRS comes in reaction to the agency’s February subpoena demanding additional user information to identify Kraken accounts that made at least $20,000 of cryptocurrency trading in a single year, between 2016 and 2020. .
The exchange, in its request, cited the 2017 Coinbase case and said the tax agency has gone well beyond the rules laid out by US District Judge Jacqueline Scott Corley. In the case of Coinbase, the agency dropped its initial demand after the exchange’s continued refusal. However, Judge Corley decided that the subpoena sent to more than 14,000 Coinbase clients was not too intrusive because the IRS had a valid reason to investigate taxpayers who might not be disclosing their Bitcoin (BTC) earnings.
Kraken’s lawyers claimed that the IRS has gone “far beyond” its intrusive subpoena, and its demands for customer information are unwarranted. Kraken has joined Coinbase in its efforts to fend off increased regulatory scrutiny from US regulators. Coinbase is currently waging its own battle against the US Securities and Exchange Commission. for offering cryptocurrency staking services.
The SEC alleged that staking services offered by companies like Kraken and Coinbase violate securities law. While the San Francisco-based exchange settled with the SEC for $30 million for offering staking services, it has decided to head to court for its battle against the IRS.
Increasing regulatory scrutiny has become a growing concern for cryptocurrency companies in the US. The likes of Coinbase CEO Brian Armstong and USD Coin issuer Circle CEO Jeramy Allaire have warned that growing pushback from various regulatory bodies will force fledgling cryptocurrency companies to move abroad.
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