IRS Crypto Crackdown Beats Legal Challenges
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The US Internal Revenue Services (IRS) has been using "John Doe summonses" to get customer info from crypto exchanges like Coinbase and Kraken, without naming specific taxpayers. These summonses are meant to uncover people not reporting crypto income.
Some taxpayers have pushed back, claiming this violates their constitutional rights, mainly:
Fourth Amendment (privacy)
Fifth Amendment (self-incrimination)
The Court Decisions
But U.S. courts have consistently sided with the IRS. Why?
No Privacy in Shared Data
Courts say if you give your financial info to an exchange (a third party), you’ve waived privacy—just like with banks. Using exchanges is seen as voluntary, unlike cellphone tracking which happens automatically.
No Self-Incrimination
Since the IRS gets data from exchanges (not directly from individuals), the taxpayer isn't “testifying” or being forced to provide evidence—so the Fifth Amendment doesn’t apply.
Crypto Is Like Cash, But Not Anonymous
Although crypto was once seen as private, using exchanges creates a paper trail. Only peer-to-peer or private wallet users maintain some anonymity.
Even the Supreme Court refused to hear a case (Harper v. Werfel) challenging this approach, leaving current rulings in place. That means the IRS can keep using John Doe summonses to collect crypto data without a warrant.
Starting 2025–2026, new IRS rules will require exchanges to automatically report customer transactions via Form 1099. That means less need for summonses in the future, but more real-time surveillance of crypto activity.
Meanwhile, in South Africa
SARS has taken a firm stance on crypto compliance, treating digital assets as financial assets, not currency. Any income, gains, or proceeds from crypto transactions must be declared, whether from trading, mining, or being paid in crypto. With the rise in crypto activity, SARS has established a dedicated crypto unit and is working with exchanges to trace undeclared transactions. Unlike in the U.S., where constitutional challenges are testing the IRS’s data collection powers, South Africa’s approach is more administrative and audit-driven, focused on enforcing tax obligations through standard disclosure rules and penalties for non-compliance.
Bottom Line for Taxpayers
If you thought crypto was off the radar, think again. The IRS has powerful tools and full legal backing to dig into your digital wallet. Your best move? Get ahead with expert tax advice before an audit becomes a criminal case.
