2021-04-02 02:26:49

IRS obtains approval to seek customer records from cryptocurrency firm Circle

The U.S. Internal Revenue Service has obtained authorization for a “John Doe Summons” that seeks to unmask high-value customers at cryptocurrency service provider Circle Internet Financial Inc.

The summons, approved by the federal court in the District of Massachusetts, demands that Circle along with its predecessors, subsidiaries, divisions and affiliates, including Poloniex LLC hand over records of U.S. taxpayers who conducted at the least the equivalent of $20,000 in cryptocurrency transactions during the years 2016 to 2020.

The IRS is seeking the records, unsurprisingly, as part of an investigation into tax fraud. The IRS claims that because transactions in cryptocurrencies can be difficult to trace and have pseudo-anonymous aspects, taxpayers may be using them to hide taxable income.

“Those who transact with cryptocurrency must meet their tax obligations like any other taxpayer,” Acting Assistant Attorney General David A. Hubbert of the Justice Department’s Tax Division said in a statement. “The Department of Justice will continue to work with the IRS to ensure that cryptocurrency owners are paying their fair share of taxes.”

There is precedent in the IRS chasing cryptocurrency firms for customer records with a similar order being made against Coinbase Inc. in 2017.

Why Circle is being targeted now is not clear. While Circle is fully registered and legally operating in the U.S., the mention of Poloniex in the filing may give some hint. Circle purchased Poloniex for $400 million in 2018 and while it has since spun the company off again as a standalone exchange, Poloniex, at least in terms of cryptocurrency trading offered and still offers a far wider-ranging cryptocurrency trading platform.

Officially, the IRS is not alleging that Circle nor Poloniex has engaged in any wrongdoing.

Since the Pollinex purchase in 2018 Circle has kept busy, seeking a banking license and launching its own U.S. stable coin. It was reported in March 2019 that Circle was seeking to raise additional venture capital ahead of a possible initial public offering although the company is yet to pursue a public offering.

Circle has raised $271 million to date according to Crunchbase from investors including Bitmain, IDG Capital, Breyer Capital, General Catalyst, Accel, Digital Currency Group, Pantera, Blockchain Capital and Tusk Ventures.

Image: Circle

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