Coinbase fights IRS efforts to obtain customer records

Bitcoin exchange calls agency's request for "John Doe" summons overly broad.

Steven Musil Night Editor / News
Steven Musil is the night news editor at CNET News. He's been hooked on tech since learning BASIC in the late '70s. When not cleaning up after his daughter and son, Steven can be found pedaling around the San Francisco Bay Area. Before joining CNET in 2000, Steven spent 10 years at various Bay Area newspapers.
Expertise I have more than 30 years' experience in journalism in the heart of the Silicon Valley.
Steven Musil
2 min read

The largest Bitcoin exchange in the US is resisting the Internal Revenue Service's efforts to obtain records on customers who traded in the virtual currency over a three-year period.

The IRS on Friday filed a request in San Francisco federal court for a so-called "John Doe" summons to compel Bitcoin exchange Coinbase to identify all users in the US who conducted transactions between 2012 and 2015. The "John Doe" summons allows the IRS to obtain information about a group of taxpayers, even when the agency doesn't know their identities.

Bitcoin, which made a name for itself by allowing for anonymous transactions, has gone through its fair share of ups and downs over the last few years. Its ever-skyrocketing valuation a few years back attracted investors, but some of that enthusiasm faded after Bitcoin exchange Mt. Gox declared bankruptcy in 2014 following the reported theft of almost 750,000 customer bitcoins.

The Justice Department said in its filing that an IRS agent had identified three cases in which crypotcurrencies were used to avoid paying taxes. Two of those cases involved Coinbase customers with millions of dollars in annual revenues, the filing alleges.

Coinbase said it's opposing the request based on its broad scope.

"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," the company said in a statement. "Our customers' privacy rights are important to us and our legal team is in the process of examining the government's petition."

Representatives for the IRS did not immediately respond to a request for comment.