Circle Internet Financial and tax compliance: the involvement of cryptocurrencies in the IRS’s sights.

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Many crypto supporters report that Circle Internet Financial has informed its customers about a request received from the Internal Revenue Service (IRS). 

Circle has announced that it is obligated to provide documentation regarding US taxpayers who have made transactions of at least $20,000 per year between 2016 and 2020. Let’s see all the details below. 

Concern among crypto supporters: Circle notifies customers about IRS investigation

As anticipated, Circle, a company active in the crypto sector and issuer of stablecoins, has communicated to its US customers via email its intention to respond to an IRS summons.

The citation, issued on April 9, 2021, is addressed to Circle and its controlled affiliates. According to the email sent by Circle, the IRS is seeking information on customers who have made $20,000 or more in transactions in any year from 2016 to 2020. 

In the past, Circle provided cryptocurrencies like Bitcoin (BTC) to retail customers and briefly owned Poloniex.

Since then, Circle has ceased both of these activities. It no longer owns Poloniex and has discontinued the practice of selling digital currencies to retail investors. 

In the email sent to customers, Circle clarified that it is complying with the summons, stating the following: 

“We are writing to inform you that we are complying with this summons that requires us to provide specific information for your account.”

Circle has advised recipients to seek legal advice from a lawyer if they have any doubts. 

This announcement follows a similar event involving Kraken. In that case, the IRS issued a summons to this San Francisco-based cryptocurrency exchange, requesting details on customers with annual trading volumes exceeding $20,000 from 2016 to 2020.

Even Coinbase, a publicly traded platform based in San Francisco, was tasked by the IRS in 2018 to provide information about its customers.

Circle has announced that the issue related to the citation is still pending after six months. 

In the correspondence, the company has notified recipients that compliance may involve tax declarations for the years 2016 to 2020. Furthermore, suggesting to users who believe they have tax obligations to seek advice from a tax professional.

Circle announces the launch of EURC on Solana 

Circle has recently announced the debut of EURC on the Solana network.

EURC, a regulated stablecoin tied to fiat currency, operates on a full reserve model, guaranteeing a redeemable value of 1:1 for the euro. 

With the expansion of EURC on Solana, now the fourth blockchain to natively support it, Circle aims to enhance the utility of the stablecoin in peer-to-peer transfers and European remittance corridors.

This launch facilitates developers and users in interacting with EURC and USDC on Solana (SOL), thus offering opportunities for global money transfers and financial transactions. 

Companies, thanks to the access and exit ramps of Circle Mint, can convert EUR to and from EURC, accessing applications in the Solana ecosystem for exchanges and financial services.

Rachel Mayer, Vice President of Product Management at Circle, highlighted the potential for users to securely store their savings in euros without the need for traditional bank accounts, providing an effective tool against the volatility of the local currency. 

Circle aims to demonstrate its commitment by achieving full compliance with MiCA for EURC developers and users on Solana.

The main DeFi applications, including Jupiter Exchange, Meteora, Orca, Raydium, and Phoenix, are already ready to leverage EURC on Solana for instant currency exchange, trading, lending, and perpetual lending. 

Ming Ng, co-founder of Jupiter, expressed enthusiasm in offering aggregated access to the EURC, contributing to increasing euro liquidity on the Solana chain.

Solana network developers can now integrate EURC using open source and permissionless protocols, as described in the developer documentation.

New developments in Campaign for Accountability’s claims against Circle and Tron

The Campaign for Accountability (CfA), an ethical non-profit organization, has recently intensified its money laundering accusations against Circle.

In an open letter published on December 14th, the CfA reaffirmed that the USDC is facilitating the financing of terrorist organizations.

These statements were initially presented on November 9th in a letter sent to US Senators Elizabeth Warren and Sherrod Brown.

Circle had responded to the accusations on November 11, rejecting the claims as based on unconfirmed social media posts. 

However, the CfA has recently addressed a new letter to the two American senators, signed by the executive director Michelle Kuppersmith

The latter has focused criticism on Circle’s Cross Chain Transfer Protocol (CCTP), emphasizing that the blockchain protocol is used to facilitate USDC transfers on networks like Tron.

The letter states that the use of the CCTP by Circle could facilitate illicit financing. This is especially concerning considering that Tron has been implicated in law enforcement actions related to billion-dollar transactions by organized criminal groups and sanctioned entities.

Justin Sun, founder of Tron, previously denied money laundering allegations in 2019.

In addition, Kuppersmith revealed that Circle had admitted to previously “bankrolling” Justin Sun, highlighting CfA’s surprise regarding a direct relationship between Circle and the client. 

Circle has denied this statement, stating that they closed all accounts of Sun and his affiliated companies in February 2023.

The CfA has presented new evidence against Tron, citing an article from Reuters. 

This statement claims that Tron has surpassed its rival as the main platform for cryptocurrency transfers associated with groups designated as terrorist organizations by Israel, the United States, and other countries.