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The IRS is Taking Action to Uncover Identities of This Crypto Exchange’s Customers – Who Will Be Affected?

Sead Fadilpašić
Last updated: | 2 min read
Source: AdobeStock / Timon

According to the Internal Revenue Service (IRS), the American tax authority, Kraken, the giant crypto exchange, failed to provide requested information regarding its US customers who conducted crypto transactions worth $20,000 or more between 2016 and 2020.

The major exchange has allegedly been ignoring the IRS investigation summons. According to Law360,

“Cryptocurrency exchange Kraken Inc. hasn’t complied with a court-approved IRS summons seeking records on customer identities and transactions and should be forced to furnish the records.”

Per a document published on February 3, the United States of America, through a counsel, is petitioning the US District Court for the Northern District of California for an order that would enforce the IRS’ summons served on Payward Ventures, one of the companies that are a part of Kraken, and all its subsidiaries.

It claims that,

“Despite discussions between the parties, Kraken has failed to comply with the summons and has not produced the books, records, papers, and other data demanded in the summons. Kraken’s failure to comply with the summons continues to this date.

All this requested information in the summons should have already been in possession of the IRS, the filing argued.

It added that,

“The information sought in the summons may be relevant to the IRS’s investigation into the identities and federal tax liabilities of cryptocurrency users who have failed or may be failing to comply with their federal tax obligations.” 

As reported, in May 2021, a branch of the California District Court granted the IRS permission to issue a John Doe summons on Kraken in a bid to discover the identities of United States residents and citizens who had conducted high-value crypto transactions in the previous four years.

A John Doe summons, as the IRS explained it, permits the tax body to “obtain the names, requested information and documents concerning all taxpayers in a certain group.”

Additionally, per the American Department of Justice (DoJ), the IRS was at the time given the power to force Kraken to reveal information about the US taxpayer customers who conducted USD 20,000 or more worth of crypto transactions in the period 2016 to 2020.

In regards to the claims made in this February 2023 filing, a Kraken spokesperson told that,

“We have not been served with the referenced petition, but we are aware of the IRS’ prior Summons. One of Kraken’s guiding principles is maintaining the security and privacy of its client accounts. We understand that the Court has expressed concern over the scope of the Summons. The posture of this case has not previously given Kraken an opportunity to weigh in. We look forward to addressing our concerns to the Court.”

Meanwhile, on February 9, Kraken ended on-chain staking services for its clients in the US. Its announcement stated that two Kraken subsidiaries settled with the US Securities and Exchange Commission (SEC) in regard to the exchange’s on-chain staking program. 

“Starting today, Kraken will automatically unstake all U.S. client assets enrolled in the on-chain staking program,” it said. 

Staked Ether will be unstaked after the Shanghai upgrade. 

All this said, Kraken hasn’t been the only exchange targeted by IRS. You can read more about this below.


Updated at 10:55 UTC with a comment from a Kraken spokesperson.


Learn more: 
US IRS Comes After Clients of Another Crypto Exchange

US Court Hints IRS May Have Violated Coinbase User’s Privacy Rights in Tax Audit 

IRS Can Now Hunt Down America’s Crypto Tax Evaders After Landmark Ruling

Reports That IRS Won’t Tax Staking Rewards Create Legal Confusion in US; UK Taxman Updates Its Own Guidance