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Cryptocurrency exchange Kraken is challenging an investigation by the Internal Revenue Service (IRS) into the tax reporting of its users, which it sees as an "unjustified treasure hunt".
The IRS has been increasingly focused on the cryptocurrency market in recent years, with many investors being investigated to determine whether they have been underreporting their tax payments. Kraken is pushing back against the probe and is seeking to narrow the scope of the investigation.
Kraken's challenge is seen as a sign that US cryptocurrency firms are fighting back against what they consider to be unfair scrutiny. In a statement, Kraken referred to another exchange, Coinbase, which is fidgeting back back against the US authorities. Kraken stated that the IRS is "making even more expansive requests and relying on a thinner rationale" than what it had sought from Coinbase. It appears that Kraken and other crypto companies are not going to let themselves be walked over, and are prepared to contest what they see as an overreach by the authorities.
However, it should be noted that Kraken is not entirely opposed to scrutiny. The exchange has stated that it is filing pre-registration paperwork with the Ontario Securities Commission in Canada in a bid to become a registered exchange. Kraken has also stated that it is willing to cooperate with the authorities to ensure that the crypto industry is regulated in a fair and transparent manner.
Coinbase is another US exchange that has been tough when it comes to regulatory scrutiny. It is currently in a battle with the Securities and Exchange Commission (SEC), seeking more clarity on the regulator's position. Coinbase CEO Brian Armstrong has urged Congress to prevent the SEC from interfering too much in the crypto industry. Coinbase has also filed a petition against the SEC asking for more clarity, seeking to compel the regulator to respond to its pending rulemaking petition.
The IRS had previously sought information about accounts on Coinbase, ordering the exchange to report over 14,000 users. The move by US authorities has irked the crypto community, who feel that it is an overreach. Taxation and KYC (know your customer) compliance remain some of the biggest concerns for authorities in the United States, and it is unlikely that these incidents will be the last of their kind.