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Coin Center and DCLDC File Amicus Briefs in IRS-Coinbase Case

By

Matthew

De Silva

WriterETHNews.com

On August 3, 2017, Coin Center and the Digital Currency & Ledger Defense Coalition filed proposed amicus curiae briefs in the US Federal Court in San Francisco. The two entities oppose the enforcement of the IRS summons issued to Coinbase.

Coin Center and the Digital Currency & Ledger Defense Coalition (DCLDC) have each filed proposed briefs as amicus curiae raising concerns about the IRS summons issued to Coinbase. Yesterday, ETHNews outlined the proposed brief submitted by the Competitive Enterprise Institute (CEI).

The Coin Center brief makes three contentions.

  • The IRS’s purpose in this investigation is either to mount a general research project, or else it expresses a manifestly incorrect assumption that all or most virtual currency transactions are made to evade taxes and the law
  • Bitcoin and related technologies are promising innovations; their use and development are almost entirely legitimate and occur within a highly regulated space
  • The IRS has failed to keep pace with other policymakers with respect to Bitcoin and related technologies; this overbroad investigation is not an appropriate means to catch up

Adding to the “fishing expedition” concerns of Coinbase, John Doe 4, and CEI, Coin Center worries that the IRS could use vague statements of purpose to legitimize future John Doe summonses. What would prevent the tax agency from conducting equally baseless investigations into the activities of stock market investors, art connoisseurs, or rare book dealers? Reviewing all financial records might turn up a few bad apples, but the brief maintains that the IRS grossly mischaracterizes the majority of virtual currency users.

Today, Bitcoin currently exists within a clear governing framework, argues Coin Center. The Financial Crimes Enforcement Network and the Consumer Financial Protection Bureau are active in the digital currency space, while the Commodity Futures Trading Commission and Securities and Exchange Commission have already begun offering regulatory guidance. Coin Center insists, “The summons runs counter to the several healthy public-private relationships that have blossomed between Bitcoin companies and other regulators.”

Blockchain pilot projects by finance and technology giants such as Microsoft, Deloitte, JP Morgan, and IBM are also highlighted by Coin Center as evidence of innovation potential. All things considered, the Coin Center brief argues, the sluggish approach of the IRS should not be reason enough for the Court to enforce a sweeping summons.

The DCLDC brief raises very similar concerns. Its three main points are as follows:

  1. Bitcoin is a revolutionary technology with vast potential
  2. The IRS’s Petition is fundamentally flawed
  3. Granting the summons sets a dangerous precedent, stripping people of important privacy rights and discouraging behavior that should be encouraged

In addition to complementing previously made arguments, the DCLDC attacks myths about the anonymity of Bitcoin. The brief cheekily recalls how “two former federal agents were charged with bitcoin money laundering and wire fraud for which bitcoin tracing analysis was used.”

Perhaps most poignantly, the DCLDC brief suggests that enforcement of the summons will “create the very behavior of which the IRS complaints [sic].”

Both briefs by Coin Center and the DCLDC are available below:

Matthew De Silva

Matthew has a passion for law and technology. He graduated from Georgetown University, where he studied international economics and music. Matthew enjoys biking and listening to tech podcasts. He lives in Los Angeles.

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