Bitcoin users are a notoriously private bunch and that’s a notion that doesn’t sit well with the tax collectors at the US Internal Revenue Service (IRS).
Of course giving up any of their hard won privacy isn’t a notion that sits well with Bitcoin users, and that’s setting up a major legal battle over how private digital currency use will be in the years ahead.
The IRS recently received approval from a Federal court to dig into the piles of data on Bitcoin users at Coinbase through the use of what are known as John Doe Summons.
The John Doe summons is a legal maneuver that IRS officials use to dig around for information, even when they don’t know exactly who they’re digging around for.
In this case, the IRS wants to see all of Coinbase’s records of interactions with its customers between 2013-2015. Coinbase is countering the IRS onslaught with a legal action of its own, according to Forbes.com.
Earlier this week Coinbase filed a motion in Federal Court seeking to halt the John Doe Summons. In its motion, Coinbase states that not only is the IRS seeking too much information about Bitcoin users, but also that the tax collectors wouldn’t know what to do with the information if they actually got it.
Coinbase goes on to suggest that the systems the IRS would be using to store its treasure trove of Bitcoin data aren’t exactly secure. That, according to Coinbase, could potentially jeopardize the privacy of lots of innocent Bitcoin users.
Whether or not a judge will buy, or even understand, any of this remains to be seen.
The IRS has tremendous leverage when it comes to gathering information and isn’t bound by the same standards as a federal agency that was, for example, investigating a bank robbery. That means that Coinbase is, very likely, fighting a losing battle.
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