Coinbase is the biggest and the most popular cryptocurrency exchange in the US. With millions of users making use of the platform to buy and sell Bitcoin, Bitcoin Cash, Ether and Litecoin, it is a very popular exchange. What adds to the popularity of Coinbase is the fact that it supports Credit Cards and Debit Cards, as well as offers a simple and easy to use UI. Coinbase has now announced that they have been asked by the US Tax Authorities to hand over details of over 13,000 users.
This news comes as a surprise to no one as most users had almost been expecting this. Platforms which involve a KYC verification always comply with government laws when it comes to handing over user data. This actually began in December when the IRS issued a summons notice, demanding data of as many as 500,000 customers. However, Coinbase took the IRS to the court stating that this would be a major violation of the privacy of their customers. Following the court battle, the IRS has finally settled on the data of 13,000 customers.
For every user whose data has been sent over to the IRS, Coinbase has sent an e-mail alerting them of the same. The mail sent by Coinbase states that ‘only certain limited categories of information’ have been provided to the IRS, but does not specify which ones. The data will be provided to the IRS within a period of the next 21 days. In the mail, the company states that "If you have concerns about this, we encourage you to seek legal advice from an attorney promptly."
Coinbase has been asked to send over the data of those users who have recorded a trading volume of $20,000 or more between 2013 to 2015. 13,000 users is a ‘partial, but still significant, victory’ as compared to 500,000 users, says Coinbase in the mail.
As of October 2017, Coinbase had over 13.3 Million users. A number which has certainly risen following the massive rise in cryptocurrency prices in November, December and early January. While not all of these users are based in the US, it is expected that a significant number of them are from there.
As per the US Laws, cryptocurrencies are taxed as ‘property’ and all the cryptocurrency profits must be reported as a capital gains income. Losses on cryptocurrency can be reported to offset gains. Coinbase has been fighting for the privacy of their users - having brought down the IRS from 500,000 users to 13,000 users. Them letting the users know that their data is being shared with the IRS was also a good move from the company! Moreover, those who have duly reported all transactions and paid taxes have nothing to fear.
The IRS and the US Government aren’t the only ones who are demanding cryptocurrency exchanges to hand over user data. Recently, Indian cryptocurrency exchanges too were asked to hand over data to the Indian Tax authorities and summons and tax notices were sent to a number of cryptocurrency investors in India.