The US tax authority IRS is paying Chainanalysis to track and identify Bitcoin users. What are the consequences of the US IRS Bitcoin transactions tool for the market? Has Bitcoin become less anonymous?
24 August, AtoZForex – The Internal Revenue Service (IRS) adopted a tool tracing Bitcoin transactions. It was developed by a start-up company Chainalysis. The tool helps to find out the owner of a digital wallet, thus unmasking the user behind Bitcoin. Chainalysis has an access to 25 percent of all Bitcoin addresses, which helps to uncover roughly 50 percent of all Bitcoin activities. Does this mean that the anonymity of Bitcoin is slowly coming to an end?
US IRS Bitcoin transactions tool affects Bitcoin anonymity
The US IRS Bitcoin transactions tool poses a threat on the anonymity of Bitcoin, which is one the main USPs for people to get into Bitcoin. Especially, after the price of the digital currency soared to the all-time highs of $4,440 last week. The number of investors buying and selling Bitcoin has increased significantly. Eventually, this will also lead to more tax issues, as not everyone is declaring their Bitcoin taxes according to the books.
Having an access to IRS tool to track Bitcoin transactions, making Bitcoin less anonymous. The IRS has been keeping the track of Bitcoin transactions since 2015, aiming to filter out any cases of money laundering. There’s evidence that the IRS has an active contract with Chainalysis, for which the institution paid over $88,000 for the solution. This gives the tax authority a chance to closely supervise cryptocurrency activities and launch investigations against potential tax avoiders when necessary. Also, the tax authority can identify the users of cryptocurrency who failed to pay taxes.
IRS stepped up with Coinbase lawsuit
In November 2016, the IRS started its Bitcoin investigation and requested the transaction records of Coinbase’s users. However, Coinbase refused to do so, insisting on the IRS narrowing down its request for information. This resulted in the decision of the IRS to file a lawsuit against Coinbase back in March 2017. According to the latest report, the IRS has agreed with to only summon the transaction records of Coinbase user’s that had transactions over $20,000. This means the US tax authority is primarily interested in investing the “big fishes”.
However, it doesn’t mean that other Bitcoin owners will stay unaffected. Bitcoin forums boiling are over with users expressing concerns on a number of popular exchanges, such as Coinbase, Kraken, and Mt. Gox. People. These users are anxious that companies like Chainalysis are able to identify the individual users here as well. This even led to users switching to more anonymous cryptocurrencies like Monero.
All in all, there’s a big chance that Bitcoin users still can make the transactions anonymously. All you need to do is avoid Bitcoin exchanges which are enforced to provide the data to government tax authorities.
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