Following the Internal Revenue Service’s (IRS) civil petition filed last week that sought disclosure of all Coinbase U.S. customers’ records between 2013 and 2015, the exchange has said that it is going to oppose the summon from the agency.
“Although Coinbase's general practice is to cooperate with properly targeted law enforcement inquiries, we are extremely concerned with the indiscriminate breadth of the government's request. Our customers’ privacy rights are important to us and our legal team is in the process of examining the government's petition. In its current form, we will oppose the government’s petition in court”, Coinbase wrote in a blog post.
The summons said that there is a “reasonable basis” for believing that an ascertainable group or class of persons has failed or may have failed to comply with any provision of any internal revenue laws. The summons stated that an IRS agent has identified three cases where bitcoin users used the digital currency to evade taxes, with two of these involving Coinbase customers, Reuters reported.
In its blog post, Coinbase emphasized that the government’s petition is predicated on sweeping statements that taxpayers may use virtual currency to evade taxes, and that the government has not alleged any wrong doing on the part of the exchange.
"We want to work with law enforcement — that's generally our policy," the company's head legal counsel, Juan Suarez, said, as quoted by Reuters. "But we can't tolerate sweeping fishing expeditions. We are very concerned about the financial privacy rights of our customers."
Speaking with Reuters, Chris Padovano, a lawyer and the founder of Decentralized Legal, said that while the case is likely more nuanced, the government may have overreached with its request to gain access to all of Coinbase's customers on the basis of the actions of just two.
"There are two questions here. One is whether or not (the IRS has) reasonably identified a class of individuals and has a reasonable basis for believing that all U.S. customers for Coinbase from 2013-2015 may have failed to comply with laws based on these three users," he said. "Two is whether the information sought by IRS is not available from any other reasonable source than Coinbase."
