The Internal Revenue Service (IRS) can move forward with its efforts to unmask high-value customers at Circle Internet Financial, a federal judge ruled Thursday.
The judge in a federal court in the District of Massachusetts authorized a request from the IRS to issue a “John Doe Summons” on all Circle and Poloniex customers who transacted $20,000 or more in crypto between 2016 and 2020. Such summons are a tactic the IRS uses to demand information on people it can not identify by name. (Circle spun out Poloniex in 2019 after buying the exchange for $400 million in 2018.)
The IRS told the court it needs the documents to ensure crypto users are paying their taxes. It believes many have not, and will now issue summons on the records to prove it. The IRS said this does not necessarily mean Circle has broken the law.
It does represent a continuation of the U.S. tax collector taking crypto investments more seriously for tax year 2020.
“Tools like the John Doe summons authorized today send the clear message to U.S. taxpayers that the IRS is working to ensure that they are fully compliant in their use of virtual currency,” IRS Commissioner Chuck Rettig said in the press statement, adding:
"We're reviewing, and of course expect to work collaboratively with the IRS in responding to the court order," Circle spokesman Josh Hawkins told CoinDesk via email.
UPDATE (April 2, 1:09 UTC): Adds comment from Circle.
The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.