Crypto exchange Kraken is challenging the United States Internal Revenue Service (IRS) over its request for detailed user information, describing the demand as an “unjustified treasure hunt.” Kraken has turned to a federal court in San Francisco to mediate the situation, urging the IRS to withdraw its request, according to Bloomberg.
The IRS issued a summons in February, seeking data on Kraken accounts that engaged in at least $20,000 worth of cryptocurrency trading annually between 2016 and 2020. Kraken’s legal response cites a 2017 case involving Coinbase, arguing that the IRS has overstepped boundaries set by U.S. District Judge Jacqueline Scott Corley in that instance. While the Coinbase case did result in the IRS scaling back its initial request, Judge Corley found that the summons targeting over 14,000 customers was not overly intrusive given the agency’s legitimate interest in identifying tax evasion.
Kraken’s legal team asserts that the IRS’s current demands go “far beyond” what is reasonable and justifiable. This move follows other crypto exchanges, such as Coinbase, pushing back against increasing regulatory scrutiny in the United States. Coinbase is currently embroiled in a dispute with the U.S. Securities and Exchange Commission (SEC) over its crypto staking services, which the SEC alleges violate securities law.
The growing attention from regulatory bodies in the U.S. has raised concerns for cryptocurrency companies, with figures like Coinbase CEO Brian Armstrong and Circle CEO Jeramy Allaire warning that such pushback may drive emerging crypto businesses offshore.