Kraken, one of the largest and most popular cryptocurrency exchanges operating in the United States, is in hot water with the Internal Revenue Service (IRS). According to the IRS, Kraken has ignored requests for customer information concerning American customers who have conducted transactions worth $20,000 or more in cryptocurrencies between 2016 and 2020. As a result, the US has applied to the United States District Court for the Northern District of California for an order to enforce the IRS subpoena served on Payward Ventures and all its subsidiaries.
Kraken’s Refusal to Comply:
Despite discussions between the parties, Kraken has failed to comply with the subpoena and has not produced the books, records, documents and other data requested. This refusal to comply continues to this day, according to the document released on February 3. The information requested in the subpoena is believed to be relevant to the IRS’ investigation into the identities and federal tax obligations of cryptocurrency users who may have defaulted or may default on their federal tax obligations.
IRS’ John Doe Subpoena:
In May 2021, the California District Court granted the IRS permission to issue a John Doe subpoena to Kraken for the purpose of identifying US residents and citizens who conducted significant cryptocurrency transactions over the previous four years. A John Doe subpoena, as explained by the IRS, allows the tax agency to obtain the names, requested information, and documents relating to all taxpayers in a certain group.
A spokesperson for Kraken told Cryptonews.com that the mentioned subpoena was not served on the company, but they are aware of the previous IRS subpoena. One of Kraken’s guiding principles is to maintain the security and privacy of its customers’ accounts. The spokesperson added that the company understands the Court’s concerns about the scope of the subpoena and looks forward to raising its concerns with the Court.
Kraken’s On-chain Staking Services Suspended for US Customers:
In another development, on February 9, Kraken ended on-chain staking services for its customers in the United States. The exchange announced that two of its subsidiaries have reached an agreement with the United States Securities and Exchange Commission (SEC) regarding the exchange’s on-chain staking program. Starting from that day, Kraken will automatically withdraw all assets of US customers enrolled in the on-chain staking program. Staked ETH will be withdrawn after the Shanghai upgrade.
Impact on Cryptocurrency Investors in the US:
Kraken’s refusal to comply with the IRS subpoena and suspension of on-chain staking services for US customers may raise concerns for cryptocurrency investors in the country. The IRS’ investigation into the identities and federal tax obligations of cryptocurrency users may result in stricter regulations and increased enforcement in the future. It remains to be seen what the outcome of the case will be and how it will affect cryptocurrency investors in the US.
In conclusion, the IRS’ request for customer information from Kraken and the subsequent refusal to comply by the exchange has raised important questions about the privacy and security of cryptocurrency investments in the US. The suspension of on-chain staking services for US customers by Kraken may also be a cause for concern. While it is too early to predict the outcome of the case, cryptocurrency investors in the US should stay informed about developments in this matter and seek professional advice as necessary.