A sigh of relief for some Coinbase customers.

By Jeff John Roberts
July 10, 2017

The Internal Revenue Service is significantly scaling back an investigation into customers who bought and sold bitcoins on the popular digital currency exchange Coinbase.

Instead of asking Coinbase for a long list of details about its customers who bought or sold bitcoin between 2013 and 2015, the IRS told a federal court it is now seeking information only for those accounts that engaged in transactions worth $20,000 or more.

The news will come as a relief to thousands of people who dabbled in bitcoin but faced the prospect of a tax investigation for failing to disclose they sold a small amount of the currency, or used it to purchase goods and services. The IRS launched the investigation in part because the price of bitcoin soared from $13 to over $1,100 during the years in question, and because only 802 people reported their bitcoin gains or losses in 2015 to the agency.

An IRS spokesperson declined to comment on the investigation’s new scope, which is limited—in the agency’s words—to users with “at least the equivalent of $20,000 in any one transaction type (buy, sell, send, or receive) in any one year during the 2013-15 period.”

The modified request, first reported by CoinDesk, was set out in a court filing titled “Notice of Narrowed Summons Request for Enforcement.” The filing also announced the IRS is limiting the scope of its request for the accounts. (You can see full details of those new limits below).

The news comes as the IRS is locked in a closely-watched court fight with anonymous Coinbase users who want to a judge to block a summons the agency served on the company last year.

Get Data Sheet, Fortune’s technology newsletter.

If Coinbase had complied with the original summons, it would have forced it to turn over personal details related to over a million accounts, and over 500,000 active customer accounts. The scope of the summons caused an outcry among digital currency owners, and led senior members of Congress to send a sharply worded letter to the IRS that warned its probe was “overly broad” and extremely burdensome.”

Perhaps in response to this pressure, a lawyer for the IRS told a judge last week that the agency would no longer seek password and security settings for the accounts.

The big question now is whether the concessions by the IRS will lead the anonymous Coinbase customers to withdraw their lawsuit, or whether they will push the court to limit the summons still further. Lawyers at the Los Angeles law firm Berns Weiss, which are representing the customers, did not immediately reply to a request for comment.

Coinbase itself is not part of the lawsuit, but it has said it would join in if the IRS failed to limit the scope of the summons.

A spokesperson for the San Francisco-based company declined to comment on the agency’s decision to only seek information on the larger accounts, and referred Fortune to a blog post from March.

The IRS move did not appear to affect the price of bitcoin, which was trading around $2,400 on Monday evening.

Finally, here are the other changes the IRS made to its request. The bold phrases are my summary of the changes, while the indented text is taken from the original summons followed by the limits set out in the July 6 court filing.

Change 1: Eliminates request for payment information and security settings.

ORIGINAL REQUEST: Account/wallet/vault registration records for each account/wallet/vault owned or controlled by the user during the period stated above including, but not limited to, complete user profile, history of changes to user profile from account inception, complete user preferences, complete user security settings and history (including confirmed devices and account activity), complete user payment methods, and any other information related to the funding sources for the account/wallet/vault, regardless of date.

NOW LIMITED TO: name, address, tax identification number, date of birth, account opening records, copies of passport or driver’s license, all wallet addresses, and all public keys for all accounts/wallets/vaults.

Change 2: Eliminates request for power of attorney letters and corporate minutes tied to third parties

ORIGINAL REQUEST: For any account/wallet/vault with respect to which the registered user gave any third party access, control, or transaction approval authority, all powers of attorney, letters of wishes, corporate minutes, or other agreements or instructions granting the third party such access, control, or approval authority.

NOW LIMITED TO: agreements or instructions granting a third party access, control, or approval authority.

Change 3: Limits request for correspondence between Coinbase and users to portions that cover account opening and closing, and transactions

ORIGINAL REQUEST: All correspondence between Coinbase and the user or any third party with access to the account/wallet/vault pertaining to the account/wallet/vault, including but not limited to letters, memoranda, telegrams, telexes, facsimiles, e-mail, letters of instruction, and memoranda of telephone or oral instructions received.

NOW LIMITED TO: correspondence between Coinbase and the covered user or any third party with access to the account/wallet/vault pertaining to the account/wallet/vault opening, closing, or transaction activity.

SPONSORED FINANCIAL CONTENT

You May Like