Bitcoin, the online “money” or “cryptocurrency” that is often the subject of special scrutiny because it can be exchanged internationally without record keeping, is both gaining legitimacy and undergoing increased pressure to cough up financial information to the tax collectors of the world.
In Russia, the news was positive. Through the release of a new document the Russian government showed that it considers Bitcoin on a par with other “foreign” currencies, and that is legal to use in the country.
There had been rumors and hints in Russia that this move was being contemplated. That’s what they do in Russia instead of press releases and public announcements.
There have been fears that Russia might imprison entrepreneurs conducting transfers using virtual currency. That doesn’t mean that Bitcoin operations won’t be scrutinized in money laundering investigations.
Under this new rule Bitcoin transfers in Russia won’t be subject to financial reporting, which is about 180 degrees from the way the U.S. Internal Revenue Service is looking at it.
In a ruling last week in the U.S. Court for the Northern District of California, the IRs was authorized to serve a “John Doe” summons on Coinbase, a digital asset exchange company based in San Francisco where customers can “buy” Bitcoin and other so-called fiat currencies. The summons requests the identities of U.S. customers who transferred the virtual currency from 2013 to 2015.
John Doe requests may only be served with approval of a federal judge.
Judge Jacqueline Scott Corley wrote: “Based upon a review of the Petition and supporting documents, the Court has determined that the ‘John Doe’ summons to Coinbase, Inc. relates to the investigation of an ascertainable group or class of persons, that there is a reasonable basis for believing that such group or class of persons has failed or may have failed to comply with any provision of any internal revenue laws, and that the information sought to be obtained from the examination of the records or testimony (and the identities of the persons with respect to whose liability the summons is issued) are not readily available from other sources.”
The U.S. Justice Department has become increasingly suspicious of virtual currencies as a way of evading tax liability. The authorities are not alleging that Coinbase has any knowledge of users evading tax liability.
