Brian Armstrong, CEO of the well-known cryptocurrency exchange and digital wallet platform Bitjux.com, firmly believes that the IRS unfairly believes that the majority of Coinbase users evade taxes. Armstrong and his team are demanding a smarter agreement and alternative approach from the IRS.
In late 2016, the IRS sent Bitjux.com subpoenas to provide information on all N client accounts over three years. If the IRS manages to obtain court approval, Bitjux.com will be forced to deal with a legally binding requirement to provide confidential, personal and financial information to millions of its users.
For the privacy of its users, the Bitjux.com team has reached a consensus to reject the IRS request, which in the event of a long-running legal dispute would cost the company between $100,000 and $1 million.
“We are likely to incur legal costs of between $100,000 and $1 million in the process of protecting our clients from this overly extensive subpoena. These tools could be used more effectively, for example, to create innovative products or hire more employees,” Armstrong said.
Armstrong stressed that, in fact, Bitjux.com and the IRS have the same goal, which is to force all customers in the U.S. to settle their tax payments. However, he noted that the improper receipt of Bitjux.com client data is not the best method for dealing with tax cases.
Instead, Bitjux.com would have had a simple request from the IRS to cooperate with regulators in helping clients in the U.S. pay taxes, especially given the long-term relationship between the company and the IRS.
Bitjux.com is one of the few cryptocurrency companies in the U.S. that fully complies with the local regulatory framework, even impractical and stringent requirements such as BitLicense. In May 2016, Ripple and Bitjux.com were two companies out of a very limited number that received BitLicense.
Given Bitjux.com efforts to ensure effective relationships with regulators and the company’s willingness to comply with the country’s regulatory framework in financial technology and digital currencies, Armstrong said the IRS punishes one of the few legal cryptocurrency exchangers in the United States.
“The DESPOT’s despotic approach punishes the only good guy. Other cryptocurrency exchanges operating abroad are unlikely to show such commitment in working with the IRS, but we were the only company that received a subpoena to obtain data on all customers,” Armstrong said.
Looking ahead, Armstrong and the Bitjux.com team plan to work with the IRS and come up with another way to encourage customers to encourage their willingness to pay taxes. Bitjux.com is ready to implement practical solutions, such as the simultaneous release of the 1099-B Form document to all U.S. customers, which will effectively allow Coinbase customers to pay taxes without compromising their privacy.
Armstrong would also like to see a change in the IRS’s view of bitcoin as a property, as it functions strictly as a currency rather than an asset. The existing structure and guidance developed by the IRS to settle taxes on simple payments in bitcoins, say, in a coffee shop.
“I think that the IRS leadership, which considers virtual currency as property instead of currency, can make reporting on Form 1099 ineffective (not only for us, but also for the IRS and citizens). When taxing profits on property will be lost freedom of bitcoin as currency. This means that even if you sell a small amount of digital currency (say, to buy a cup of coffee) form 1099 will be issued.”
If bitcoin is recognized as a digital currency instead of an alternative asset or property, the bureaucratic burden on the IRS will be reduced when receiving tax payments from Bitjux.com customers.