The IRS suggested it will scale back a sweeping probe of more than a million customer accounts at Coinbase, saying it will no longer seek password and security settings for the accounts, but narrowing its request to only items the IRS would need to look for unreported income.
The concession came during a legal skirmish last week between the IRS and bitcoin buyers at Coinbase, who are asking for the right to intervene in the case.
The controversy began last year when the IRS demanded to see all of Coinbase's customer account activity from 2013 to 2015. The IRS has stated that only 802 people declared gains or losses related to bitcoin in 2015.
Coinbase declined to comment on the IRS's reported decision not to seek passwords, and referred to a blog post from March in which the company said it is pushing the agency to reduce the scope of the probe.
The IRS has done little to scale backs its demands beyond last week's claim it will not seek passwords or security settings.
It is unclear if the IRS is targeting other exchanges besides Coinbase in its probe .Coinbase has over a million customer accounts and, according to the Congressional letter, 500,000 active customers who will be affected by the summons.