In the last couple of years, Bitcoin and other digital currencies or cryptocurrencies have been gaining bigger and bigger share of the financial market in the entire world. Because of that, governments wanted to make sure that all the transactions are conducted according to the laws and that no illegal activities are financed by bitcoin transactions. For a long time, it was almost impossible to track bitcoin transactions which was one of the main selling points of this digital currency.
However, it was just a matter of time before someone would develop a software that could trace all bitcoin transactions and the people behind those transactions. After the testing period and after these tracing software proved to be successful, government agencies all over the world have been using this software. So far, the United States government has not revealed whether or not they have been using this software until a couple of days ago.
IRS Staying On Top Of Things
The IRS or the Internal Revenue Service has been in charge of following all the money transactions in the country and only yesterday it was announced that the IRS has actually been using this software for tracking bitcoin transactions since 2015. The software that IRS uses currently has actually been developed by a startup company called Chainanalysis. Since 2015, the IRS and the Chainanalysis have been working together to find a way how to trace bitcoin transactions because one of the biggest advantages of digital currencies is the fact that transactions with these currencies are very hard to trace.
This issue would probably never come to the center of attention if Chainanalysis has not sued the Federal Government after the IRS wanted to extract as much as possible information about the users of digital currencies from another startup called Coinbase that deals with the digital currency exchange but Chainanalysis did not want to make that happen. The IRS has stated that this move is very important in order to gather evidence and information about individuals who have been using digital currencies in order to commit a tax fraud or even some Federal crimes.
According to the story that CoinDesk broke not that long ago, the IRS has attempted to get several years of data that Coinbase has obtained through their business. Coinbase and Chainanalysis are owned by the same group and it is understandable that Chainanalysis does not want to be a part of intruding someone’s privacy by providing those data.
Federal Government Requesting Too Much Data?
This resistance to the IRS’s efforts is gaining momentum in the entire country because more and more organizations are expressing their support to Chainanalysis. Among those organizations are Competitive Enterprise Institute as well as Coin Center, a non-profit organization that is based in Washington, D.C. All of them they joined the effort of protecting the right to privacy for all users of their platform and now it is one a Federal judge to decide whether the IRS will be getting that information or not.
Interestingly, Chainanalysis has not refused to provide all information. What they are saying is that the IRS needs to narrow its requests because the current request could provide IRS with all sorts of information that could be used in the wrong way. A Federal judge will have to make a decision very soon and it is impossible to say which side might have an advantage in this process.
Written by Vedran Ostojic
Thank you Vlad, btw interesting site