Bitcoin's price has skyrocketed and that has drawn lots of attention from consumers and the government alike. Bitcoin was designted to be decentralized and unregulated. However, federal agencies like the IRS are seeking to monitor large transactions to ensure traders are paying their fair share of taxes.
A judge this week sided with the IRS and has ordered Coinbase, one of the largest cryptocurrency exchanges, to turn over records for roughly 14,000 traders. The decision specifically requests the name, birthdate, address, and transaction history for users who had more than $20,000 worth of BTC in their accounts back in 2013-2015.
This decision is the culmination of a legal battle that began last November where the IRS originally sought the records of all Coinbase customers regardless of their balance. After strong resistance, the IRS narrowed their scope to the $20,000 number.
Coinbase claimed that more than 10,000 people sold over $20,000 worth of Bitcoin, but IRS records show that fewer than 10% actually paid taxes on those gains.
This decision appears to be a win-win for both parties. Coinbase was able to protect the privacy of 97% of their customers and is required to report substantially less than was originally requested. The IRS appears to have understood the privacy concerns of Bitcoin and its users. However, for the small percentage of people that do trade large amounts of BTC, this decision may be cause for panic.