In the late afternoon of Friday before Christmas, the U.S. Treasury Department’s Financial Crimes Network (FinCEN) proposed a process that streamlines data collection and reporting requirements for cryptocurrency. FinCEN gives everyone only 15 days to comment, on holidays, instead of the normal 60 days. This is a conscious attempt to push through the midnight line without giving everyone time to respond, and it leads to failure. Despite the short time, roughly 7,500 people and companies submitted comments stating the proposal, the majority FinCEN agreed on any proposed legal framework. Comments on this proposal account for almost 70% of all FinCEN comments received on all legislation since 2008 together.
Marta Belcher, a lawyer and civil liberties attorney, is a key consultant to Electronics Frontier, a general lawyer to Protocol Centers and a lawyer in the Seas & Gray. He is also the Board Chairman of the Filecoin Foundation and the Filecoin Foundation for a dedicated website. Your horns are yours.
So many people talk about the proposed process because it is a clear violation of civil liberties. Advice will require some transactions such as cryptocurrency exchanges to collect identification data not only about their customers but also about it’s not-customers who contract with their customers, and to store that data and give it to the federal government when transactions exceed a certain amount. This will give the government access to the fissures of financial data, going well beyond FinCEN requirements for non-cryptocurrency transactions.
In addition, the process will give the government more data than what the process itself thinks. The proposed regulation would give the government the identities associated with cryptocurrency wallet addresses. Because of the type of public blocks, that means the government will recognize the associated identity every transactions for those wallet addresses, especially when the amounts of those transactions are below the account threshold.
In the Electronics Frontier Foundation commentary on FinCEN’s advice, Rainey Reitman, Danny O’Brien, Aaron Mackey and I argued that the proposed regulation violates the Fourth Amendment of U.S. law.
The April amendment requires that law enforcement obtain a supporting document by the probable cause prior to the search or seizure. So why is it that, in a traditional financial system, law enforcement can control the masses of many bank customers without warranty? The answer is third-party education – the idea that a person does not have a reasonable expectation of confidentiality in the data they share with a third party such as a bank. In 1976, the Supreme Court of the United States held in the United States v Miller that the Bank Privacy Act (as enacted at that time) did not violate the Fourth Amendment because of this third party education.
More importantly, in recent years Miller, the Supreme Court has issued strong confidentiality proposals in a number of cases, dropping out of third-party education in the digital world. For example, it occurred in Carpenter v US that law enforcement must have a warranty to obtain location information from a mobile phone company. The information that can be collected in banking data in the 1970s is a far cry from the detailed picture of human life that can be taken with openness to today’s financial transactions.
Our businesses provide an intimate window into our lives – what companies we are dedicated to, what books and products we buy, who we support and even where we go. Recent images from Hong Kong advertisements show anti-democracy protesters waiting in long lines at train stations to buy tickets with cash so that their electronic purchases do not put them where the announcement took place. . These photos emphasize the importance of financial confidentiality, and why we must protect our April Amendment rights in financial transactions.