In less than two weeks after we first learned that the US government is seeking all the information Coinbase collected on its clients in the country, the court has ruled in favor of the IRS’ (Internal Revenue Service) demands. On Wednesday (November 30th) the federal judge presiding over the case decided that the Bitcoin and Ethereum exchange needs to surrender its user data for 2013-2015 to the American tax agency.
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Despite this, Coinbase is not expected to comply any time soon. It promised its clients that it would fight for their privacy rights, and there are still higher appeals procedures in the American justice system that it can turn to. Needless to say, this sets a precedent that will serve to chill bitcoin services in the US. And if Coinbase is eventually forced to transfer user data, anyone who is interested in keeping his financial affairs private will probably try to avoid American exchanges and other bitcoin service providers.
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As previously reported, the IRS took this step after it found just three cases where people allegedly tried to dodge paying taxes using cryptocurrencies, and only two of these were even Coinbase clients. Last week we turned to an experienced cryptocurrency expert that says that the IRS needs to update its tax guidelines so that cryptocurrency users can even report their gains and losses. Computer engineer and the CEO of Node40, Perry Woodin, identifies the problems with the current system which led to users being investigated and poses a two-fold solution to this problem.