Posted on Mar 24, 2015 by Rick Falkvinge

Tax Authority Demands Customer Data From Bitcoin Exchange: Demands Trackability Of Everybody’s Past, Present, And Future

The Swedish Tax Authority has demanded the full customer transaction history, specifically including customers’ wallet addresses, from the small Swedish bitcoin exchange BTC-X. This demand comes without any individual suspicion of crime, or indeed any suspicion of crime at all, even in general. As this would enable trackability of everybody’s financial past, present, and future, BTC-X is taking the Tax Authority to court over their demands.

Various authorities have long mistaken a right to demand tracking data in individual cases on concrete suspicion of a serious and committed crime for a right to throw a dragnet over tons of private data to see what sticks. However, the latest move by the Swedish Tax Authority is a new level of audacity – and a new level of mass violations of privacy.

The Swedish Tax Authority is demanding the transaction history for the 20,000 customers of the Swedish bitcoin exchange BTC-X. They, in turn, are fighting back and taking the Tax Authority to court over this demand. While the Tax Authority is doing its usual spin dance, claiming “it’s just routine” and “just a data snapshot”, not to mention “it’s lawful”, the truth is that this dataset would give the Tax Authority a horrifying level of trackability over everybody’s everyday finances – far beyond what has ever been asked for before.

It would not just be a snapshot. Due to the nature of bitcoin, if the Tax Authority wins in court and receives this data, they will have not just a snapshot of the present – they will also have full trackability into the past, and worse, full trackability of everybody’s financial data into the future – including all the things those people will do outside of that exchange in the future.

Will the courts understand this point? It’s crucial to understand the scale of the violation being committed. As we’ve stated before, bitcoin may be pseudonymous – but it provides for financial tracking that can be used for a dystopic society where the government knows of not just every cent or satoshi spent, but has a very good idea of who transacted it. The Swedish Tax Authority appears to be seeking the ability to create just that dystopic future.

Privacy remains your own responsibility, indeed.

About Rick Falkvinge

Rick is Head of Privacy at Private Internet Access. He is also the founder of the first Pirate Party and is a political evangelist, traveling around Europe and the world to talk and write about ideas of a sensible information policy. Additionally, he has a tech entrepreneur background and loves good whisky and fast motorcycles.


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8 Comments

  1. DaLi

    Shouldnt focus be on highlighting the somewhat inherent problems with exchanges such as BTC-X? Exchanges more than anything seems problmatic. Its nature and alternative models must be researched in depth.

    3 years ago
    Reply
  2. Nope

    Thats why we need Monero

    3 years ago
    Reply
  3. Dogecoin

    Exchanges should report individuals financial activity as with standard stock exchanges. Buys, sells, profits, etc. But no wallet data should be shared.

    3 years ago
    Reply
  4. davout

    Only in the bitcoin-sphere are we outraged when the tax authority asks to have a look at a company’s books…

    3 years ago
    Reply
  5. shoehorn

    Seems the world banks/governments are making sure you can’t hide your money/assets in any form, so they know what they can tax or steal from all of us. Next will be the US Gov.t. and everyone other tax entity in the world.

    3 years ago
    Reply
  6. Steve3

    Yep we are niave to think that bitcoin would be allowed to be private currency without Government intervention

    3 years ago
    Reply
  7. vatten

    shapeshift

    3 years ago
    Reply
  8. Antimon555

    I told you so. To be precise, the 5:th of February 2014.

    The following is some of what I wrote on my blog Integritetsnytt (“Privacy News” in Swedish), about Bitcoin, however I won’t post a link because I don’t think they are accepted in these comments.

    “The anonymity that isn’t there

    On many websites, in newspapers and on TV it is said that bitcoin is
    an anonymous type of transaction. That is true, since no personal
    information is needed to create an account. But the Bitcoin system is
    based on traceability.

    All transactions are stored permanently in the ”block chain”, which
    is open for the public to look at. Everyone can see, citizen, business
    and intelligence agency alike, which bitcoins has been transferred, from
    what account they were transferred, to what account.they were
    transferred. The accounts are only identified by a random code, but if
    one has access to other information, such as what person had what IP
    address when the transaction was made, or a receipt , either a paper one
    or one online, that includes the account numbers, it is a trivial task
    to pair a certain transaction with a certain individual and a certain
    business, or with a certain pair of individuals.

    Since every ”part” of a bitcoin has its own unique ID, one can trace
    exactly what money has gone where. If one sends a bitcoin around between
    twenty different accounts, and then to the payment receiver, it is
    still likely that the sender and receiver can be identified, since a
    constant sum has been moved around. Splitting it into parts of different
    sizes in every step is safer, but with the revelations of backdoors in
    lots of cryptography, it is likely that it’s still possible to track it.

    Also, the most convenient way of paying in Bitcoin in a store, is
    with a smartphone. Both Google’s and Apple’s smartphones have time after
    time been proven to be about as leak-proof as a sieve. GPS positioning,
    user behaviour, wireless networks, and – as with all cell phones –
    positioning by the cellular grid. If this can be connected to the
    Bitcoin accounts, it’s full speed ahead for the surveillance people,
    both the ones in advertisement and the ones in the government’s service.”

    “Regulation or ban

    If bitcoin is widely accepted, and the problem with the lack of
    anonymity is solved, government regulation will be made instantaneously.
    When looking at regulation of the centralised digital payment
    solutions[from Sweden/EU perspective, I’m not sure how it is in the rest
    of the world], one can assume that making anonymous transfers with
    Bitcoin will become illegal, no matter if it’s technically possible or
    not, and because the responsibility is on citizens and not businesses,
    the punishment will be harsh.

    If Bitcoin becomes big, many banks will go out of business since they
    will become unnecessary. The banks, that are mega businesses, will put
    an end to that through massive amounts of lobbying. Laws may be made,
    that completely prohibits the use of Bitcoin, and also in this case,
    very high penalties can be expected.

    Governments also have an interest in banning Bitcoin if the anonymity
    is preserved, since it will be harder for them to get the taxes. And
    the bank lobbyists will blow that fact way up out of proportion.

    When the first big country in the West, probably USA, prohibits or
    heavily regulates the use of Bitcoin, all others will quickly follow
    suit, and the Bitcoin value crashes to just about zero.”

    3 years ago
    Reply