Coinbase and the IRS

I think you are fighting the good fight Brian!<p>In tin hat mode, its possible that the subpoena is actually being driven by the justice department not the IRS. As you point out there are a number of less invasive ways of insuring tax compliance but there are not better ways for unwrapping large number of bitcoin transactions involved in ransomware or other extortion or criminal activity. We saw from the MtGox fiasco that when their entire transaction record for all clients was analyzed it identified not only internal corruption but a variety of schemes being used to manipulate or defraud.<p>Let&#x27;s assume that Justice has the full transaction records for one or more of the non-US exchanges, by adding all of your records to the mix it would give them the visibility they need to unwind a lot of stuff.<p>As I understand it, when you make the motion to quash you can compel them to tell you exactly how they were going to use the data. Don&#x27;t let them be evasive on that point.

I used bitcoin quite heavily in 2016 through the &#x27;shift&#x27; card that coinbase offers, and I think I&#x27;m going to hold off on further use in general until tax stuff is more clear &#x2F; straightforward - I&#x27;ve made an effort to pay the bitcoin taxes correctly in previous years, but not personally being an accountant, had to hire one to check all the stuff (I&#x27;m not super rich, so this is a little bit annoying). The point of this comment is that I think it is a good thing coinbase is trying to standardize some reporting method - I also agree with the &#x27;1099 for each cup of coffee bought with bitcoin&#x27; seems a little bit much...

For some negative context on Coinbase, take a look at <a href="http:&#x2F;&#x2F;reddit.com&#x2F;r&#x2F;coinbase" rel="nofollow">http:&#x2F;&#x2F;reddit.com&#x2F;r&#x2F;coinbase</a>.<p>It looks like, despite the shiny front and claims, they are still not a solid, trustworthy company, even though they play with a lot of others&#x27; money. In particular, the mechanics of their transactions are not obvious (e.g. long wait times), and their customer service is subpar, making some customers feel scammed, with no recourse.

fwiw, Coinbase wouldn&#x27;t be the first financial institution to challenge a John Doe Summons. The IRS issued one to UBS in 2008 (<a href="https:&#x2F;&#x2F;www.justice.gov&#x2F;archive&#x2F;tax&#x2F;txdv08584.htm" rel="nofollow">https:&#x2F;&#x2F;www.justice.gov&#x2F;archive&#x2F;tax&#x2F;txdv08584.htm</a>). UBS claimed it couldn&#x27;t comply with the summons without breaking Swiss bank secrecy law, and the Dept of Justice ultimately came to an agreement directly with the Swiss government (under an existing tax treaty) to get the records it was seeking. Simultaneously, the IRS set up a voluntary disclosure program for Americans to pay a penalty on back taxes and avoid criminal prosecution. The amount of back taxes owed on bitcoin capital gains is probably less than the amount being sheltered by the Swiss in 2008, but it&#x27;s not nothing.

These IRS witch hunts do little but inspire FUD about bitcoin, thus hampering widespread acceptance, and keeping the US financial system in a bygone era.

Bitcoin is a technology defined by its community. That&#x27;s why they made a public comment about a pending legal issue - to defend their reputation within that community. A community that, for instance, leads a HN discussion to be &gt;50% arguments about whether government of any type is a bad idea. They&#x27;d get even more customers of they refused to comply with any subpoena, but then they&#x27;d be unable to interface with modern banking.

This is a good move for Coinbase, i&#x27;m glad they are defending their users. They are right that it is overly broad. I don&#x27;t see how IP addresses and customer support transcripts are a matter for the IRS.

Speaking as a Coinbase user I would <i>love</i> it if they could just send me a 1099. It would make filing my taxes a whole lot easier.

&gt; For tax purposes, gains on property do not have a de minimis exemption like currency. This would mean that even the sale of a small amount of digital currency (say to purchase a cup of coffee) would generate a 1099 form.<p>Does that mean you could write a program that created virtual currencies and transactions between them (along with their required 1099 forms) in order to troll the IRS by submitting TBs of data?

They estimate it might cost them up to $1MM. Question - if IRS lose, can they recover most of legal fees??

They talk about having &quot;invested&quot; in the tremendous waste of time and effort that is &quot;compliance&quot;, simply to enforce ridiculous jurisdictional fiefdoms&#x27; opinions about who you can or can&#x27;t send your money to.<p>Imagine a world where this terrible waste weren&#x27;t mandated by the men with guns. Imagine a world where cryptocurrency executives didn&#x27;t try to spin this huge coerced waste as a positive.<p>This is the reason cryptocurrency was invented. Shapeshift is the right direction. Coinbase is the wrong one.

Offtopic, but why would a CEO make an important (for his company and customers) post like this on medium.com? Why isn&#x27;t this hosted on blog.coinbase.com or something? I know that Medium is a popular platform these days, but I think it weakens the branding of any company or individual to be posting there.

tldr; CEO: &quot;Coinbase and the IRS have (I believe) a shared goal to ensure all U.S. customers pay their taxes. I believe a good option would be to use the same third party reporting mechanism that brokerage firms like Fidelity and Charles Schwab use today: the 1099-B form. We’d ideally like to see that structure applied evenly to all companies in the industry, but even if we’re required to go first, we’re ready to implement 1099-B reporting. With this potential solution, Coinbase (and other virtual currency exchanges) would issue a 1099-B at the end of the year to all U.S. customers, and send a copy to the IRS. This would make it easy for users of virtual currency to pay their taxes without violating their privacy.&quot;