US government urges court to reject Coinbase user’s crypto records fight

The US government has urged the Supreme Court to reject a Coinbase user's challenge to the IRS's effort to obtain his cryptocurrency transaction records.

The case involves James Harper, a Coinbase user who sued the IRS, claiming that the agency's demand for his crypto records constituted an unconstitutional search violating the Fourth Amendment. However, the government argues that Harper has no reasonable expectation of privacy in financial records voluntarily shared with a third party like Coinbase, citing Supreme Court precedents such as United States v. Miller.

The IRS obtained the records through a judicially approved summons as part of a 2016 investigation into widespread tax underreporting on cryptocurrency gains. Lower courts have ruled in favor of the IRS, finding that Coinbase's records are business documents, not Harper's private papers, and that the IRS acted lawfully.

The government filing emphasizes that Coinbase's privacy policy warned users that their information could be shared with law enforcement. The Supreme Court has not yet decided whether to hear the case.

Separately, another Coinbase client, Roger Metz, has sued to block IRS requests for his crypto transaction records, arguing the IRS's demands exceed the scope of verifying his tax return and violate his privacy rights. This case is pending in a district court and raises similar privacy concerns.

Coinbase itself has filed briefs urging the Supreme Court to protect users' privacy interests in digital information stored by third parties, warning against broad government dragnet searches of customer data. The exchange argues that such IRS summonses threaten user anonymity and privacy on blockchain platforms.

The US government is pushing back against Coinbase users' attempts to block IRS access to crypto transaction records, maintaining that the IRS acted within legal bounds and that users have limited privacy rights over data held by third parties like Coinbase. The Supreme Court's decision on whether to hear the case will be pivotal for crypto privacy and tax enforcement.

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