Today the Bitcoin community saw something unprecedented, the American Internal Revenue Service (IRS, Tax Agency) sent a request to Coinbase, the most popular Bitcoin exchange in the US, demanding customer’s information ranging from 2013 to 2015.

The California Northern District Court is seeking to gather information about “John Does,” a generic term used as a placeholder name for a party whose true identity is unknown, and who meets the following criteria:

United States persons who, at any time during the period January 1, 2013, through December 31, 2015, conducted transactions in a convertible virtual currency.

The document, which can be read online, has been forwarded by Jeremy Hendon and Amy Matchison, Trial Attorneys in the Tax Division of USA’s Department of Justice to Coinbase, inc. According to the text, there is a “reasonable basis” for the inquiry, as there may be some customers who failed to comply with internal revenue laws.

IRS argues that, in general, the sale or exchange of “convertible virtual currency” has tax consequences that may result in tax liability.  Although this deliberation by the Tax Agency isn’t new, the document is used as an exhibit to further validate IRS’s claims on the matter.

The I.R.S. not only has suspicion that the John Doe class includes U.S. taxpayers who are not complying with the law, but it knows that the class in the past included such violators, and very likely includes others.

The tax agency asked Coinbase to produce records of Account/wallet/vault registration records, including all of the user’s profile settings, history of transactions, balances, destination addresses, and their associated identity, among many others.

Not long ago, the Treasury Department’s inspector general issued a statement on November 8th, urging the IRS to “take additional actions to ensure taxpayer compliance”. The report said:

None of the I.R.S. operating divisions have developed any type of compliance initiatives or guidelines for conducting examinations or investigations specific to tax noncompliance related to virtual currencies.

Coinbase will fight the IRS request in court, the company said in a blog post. The digital asset exchange has cooperated in the past with law enforcement authorities over specifically targeted cases, but this request by the IRS is unprecedented:

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. We will continue to keep our customers informed on developments in this matter.

ICO-skeptic Preston J. Byrne had some words about the issue:

https://twitter.com/prestonjbyrne/status/799680570653556736

As well as researcher and hacker Emin Gün Sirer:

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