IRS investigation into customers who bought and sold bitcoins

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.

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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.

(By Jeff John Roberts )