Coinbase will be delivering full user account data to the United States Internal Revenue Service (IRS) for ~ 13k customers. It’s reasonable to assume that these 13k accounts will include EVERY whale account from the United States. There are some folks who transferred very large amounts of crypto into USD in 2017, untold millions.
[The U.S. Government] requested nine categories of documents including: complete user profiles, know-your-customer due diligence, documents regarding third-party access, transaction logs, records of payments processed, correspondence between Coinbase and Coinbase users, account or invoice statements, records of payments, and exception records produced by Coinbase’s AML system.
While all of this is consistent with failure to pay tax on securities trading and unreported income, the crypto community members are likely not prepared for full compliance — either ideologically or due to unclear tax enforcement policies to date.
In response to compliance initiatives like this from Coinbase, we will see more of the following:
- Peer-to-peer trading via distributed exchanges: This is already being heavily proven on exchanges like EtherDelta. The real excitement will come once the various communities agree on protocols to jump networks and provide cross currency trading between peer-to-peer exchange, i.e. BTC / ETH, XRP / BTC, XMR / BTC, ZEC / XMR — then pandora’s box will be ripped open.
- Peer-to-peer trading in person: It’s best to keep quiet here as some of the heaviest operators in the world already exist in this space.
- On-chain analysis will explode as a budget line-item for banks and governments. Compliance enforcers and compliance partners will do everything they can to connect the dots on anything that resembles public transaction data.
- Commercial cryptocurrency exchange for goods and services will continue to be a trivial component compared to global money exchange (and/or) laundering. If micro-transactions continue to incur large network/transfer fees, crypto will never be realistic for small daily transactions. Off-chain networks may affect this, but it remains to be seen to what extent.
- Countries that are pro-privacy, pro-autonomy and anti-extradition will continue to attract interest of high net worth individuals.