Inside the IRS’s Expanding Surveillance of Crypto Investors

Core Viewpoint - The IRS has significantly expanded its crypto surveillance capabilities since 2017, moving from targeted investigations of individual traders to broader requests for user records from major exchanges and crypto companies [1][2]. Group 1: IRS Surveillance Expansion - The IRS has transitioned from focusing on specific transaction thresholds to a more comprehensive approach aimed at identifying tax non-compliance across multiple crypto exchanges [2]. - Major exchanges such as Coinbase, Kraken, Poloniex, and Circle were initially targeted, but the enforcement has since broadened across the sector [2]. Group 2: Enforcement Actions and Results - In fiscal year 2021, the IRS generated $3.5 billion in crypto seizures, which accounted for 93% of the agency's total asset seizures that year [3]. - The IRS secured court approval for John Doe summonses targeting users of Kraken, Circle, and Poloniex who transacted $20,000 or more during specified periods [4]. Group 3: Ongoing Investigations - By June 2023, the IRS had opened 216 examinations and sent nearly 15,000 "soft letters" to crypto users identified through exchange data [5]. - The IRS must meet three legal thresholds to obtain John Doe summonses, which include demonstrating an ascertainable group of persons, establishing a reasonable basis for believing noncompliance, and proving that information is not readily available from other sources [6].