Coinbase Gets Legally Involved In IRS Summons Issue

Coinbase Gets Legally Involved In IRS Summons Issue

If you have any interest in bitcoin or the world of cryptocurrency you will know that the IRS has submitted a John Doe Summons to require San Franciso-based, digital asset exchange company Coinbase to submit a complete list of all their clients covering a period of 3 years from the years 2013-2015 inclusive.

In case you're not up to date in this continuing saga, here's the basics:

  1. In November, 2016, the US IRS filed a John Doe Summons, demanding three years (2013-2015) customer database records from Coinbase on the suspicion that some Coinbase users/traders may not be paying their cryptocurrency taxes. 
  2. Subsequent to this filing, Coinbase says they were aware of it and looked forward to discussing the matter but had concerns about the privacy rights of their customers.
  3. Subsequent to Coinbase's statement, on of their customers, Jeffrey K Berns of the Berns Weiss law firm in California, filed a request that the court intervene to stop the summons on grounds that is was overly broad and invasive of Coinbase customer privacy. Note: Mr.Berns also was and presumably still is a Coinbase customer.
  4. Next, the IRS tries to dodge Mr.Berns' filing by stating that since he is now officially known to them as a Coinbase customer he is therefore not a subject of the summons and therefore has no standing in the issue.
  5. Mr. Berns then says that that doesn't make any difference because the John Doe Summons statue do not prohibit him from making an inquiry into the issue, he still thinks the IRS is overstepping its legal authority, and he will still fight the matter in court.

So that's where the issue is as of today. Note that all of this has taken place within the last 90 days.

The latest news is that whereas Coinbase itself has not had any official, legal response to the IRS's filings, now it says it has something it wants to say in court too.

The big question is…."what and why"?

One could reasonably wonder what point Coinbase could make that Mr. Berns hasn't already made.

1.  The stated justification for the IRS's John Doe Summons is overly broad. But Mr. Berns has already said that.

2.  It is an invasion of privacy (in a commercial sense) but Mr. Berns has already mentioned that too.

3.  Not specifically mentioned but also true is that if the IRS can do this, it sets a very bad precedent for even more and potentially broader nefarious IRS demands in the future because it presumes guilt on a sub-set of Coinbase customers. For example, what's to prevent the IRS from demanding records of everybody who bought art supplies from an art supply store because they thought somebody was selling home-made paintings in garage sales and not paying their taxes?

Or, could the reason that Coinbase wants to got to court be that they are trying to set the stage to look like they are trying to stand up for the rights of their customers when they really are perfectly willing to give the IRS all they want?

After all, one way or the other the cryptocurrency business is here to stay. Coinbase could rationally say to themselves, "Our customers don't have any choice but to use or somebody like us if they want the kind of services we provide. So we'll just, under feigned protest, to keep the IRS happy and off our backs."

Nobody really knows exactly what it is that Coinbase wants to say in court but it will be interesting to find out because this whole industry of cryptocurrency is still in its infancy. Exactly how it will fit into our daily lives has yet to be defined either by governments or in terms of consumer acceptance.

It would be nice if those who think that we are seeing the dawn of a grandiose new era of free enterprise and laissez-faire entrepreneurship were right. But all the chips haven't fallen into place yet and cryptocurrency could just turn out to be an excuse for more government intrusion and intrusion into the affairs of normal people.

For more details on these proceedings, just Google, "Coinbase IRS John Doe Summons".

Art Williams
Freelance Copywriter
Case Studies and eMail Copywriting
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