The IRS will likely gain access to records from two crypto companies, Circle and Poloniex, to root out tax evasion among U.S. investors.

According to the U.S. Department of Justice (DoJ), a federal court in the District of Massachusetts has authorized the Internal Revenue Service (IRS) to issue summons to Boston-based blockchain payments firm Circle and its former subsidiary Poloniex.

The legal action will ask Circle and Poloniex to share data on U.S.-based customers who conducted crypto transactions worth at least $20,000 between 2016 and 2020.

This type of order is known as a John Doe summons, an investigative tool deployed by the IRS to seek data on specific U.S. individuals who may have failed to comply with federal tax laws.

“The John Doe summons is a step to enable the IRS to uncover those who are failing to report their virtual currency transactions properly. We will enforce the law where we find systemic non-compliance or fraud,” IRS Commissioner Chuck Rettig wrote.

The DoJ’s official announcement clarified that it does not allege that Circle was involved in any wrongdoing. Instead, the action is part of an “investigation of an ascertainable group or class of persons” that the agency suspects are non-compliant with U.S. tax laws.

The order is another example of how U.S. regulators have increased their efforts to monitor the cryptocurrency sector. In previous years, crypto exchange Coinbase has become well known for cooperating with the IRS and reporting user trading activity.

Separate from the IRS’s efforts, the U.S. Treasury and FinCEN plan to enforce KYC rules for self-hosted crypto wallets. The regulation would make it mandatory for cryptocurrency firms in the U.S. to record personal data associated with transactions above $3,000 and report crypto transactions over $10,000.

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