At any point of the digital transition,…
On Monday, the Electronic Frontier Foundation (EFF) issued a statement that one of the most important facets of cryptocurrencies is that they can provide privacy protection for users from the perspective of civil liberties. However, EFF is worried that steps are gradually being taken by the US government to weaken the privacy of transactions of cryptocurrencies and to implement comprehensive financial monitoring of the traditional banking system in cryptocurrencies.
The U.S. last Friday The Financial Crime Compliance Network (FinCEN) Department of the Treasury has announced a new law forcing money processing providers (including cryptocurrency exchanges, etc.) to collect and use cryptocurrency wallets or international exchanges for self-service purchases for their clients. Identity records of the person making the purchase. The new legislation would force them to carry this information and, under some cases, give it over to the government (for example, when the transaction amount in a day exceeds a certain threshold).
As the 15-day consultation period is unusually short and coincides with a weekend, the legislation appears to be expected to be a midnight rule to be passed by the close of the current presidential term.
The authors of the regulation wrote that in order to deal with the “threat to the national interest of the United States” of these developments, this brief comment period is required, but they did not offer a substantive justification for this assertion.
Though the plan is still being reviewed by the EFF, there are a few preliminary questions. First, the rules would mean that individuals that hold cryptocurrency in their own wallets (rather than using professional services) would not necessarily be able to make confidential transfers with individuals in money processing providers that store cryptocurrencies. The right to use patented wallets for private cash transfers is likely to be killed by this rule.
Second, transaction data, including the user’s Bitcoin address, will be permanently registered on the public blockchain for such cryptocurrencies, such as Bitcoin. This means that you can obtain all the Bitcoin transaction information that users use that address if you know the identity of the person connected with a specific Bitcoin address.
The new regulations also mandate money service providers to gather wallet address-related identification details, which ensures that a vast amount of information will be collected by the authorities, not just the coverage stated by the regulations.
Third, the regulations may impede, or at least make it difficult to incorporate these technologies with intermediaries such as exchanges, the wider adoption of self-custodial wallets and technologies which rely on them. This legislation makes it much more difficult for users of self-hosted wallets to connect seamlessly with other users who have wallets supplied under this regulation by services.
Under the new legislation, such details about self-service wallet users who exchange with their customers under certain conditions would have to be obtained by these custodial wallet providers.
In situations involving decentralized exchanges, this can exacerbate such electronic transfers, such as smart contracts, or be difficult to enforce. Wallets”wallets” The importance of technology in helping people to manage their finances is compromised by the inclusion of friction to these forms of transactions. The potential of innovators to build decentralized finance networks with a wide variety of legal uses can also be stifled.
Fourth, although the new regulations are meant to explicitly extend current rules on cash transfers to cryptocurrencies, the presence of these digital financial instruments is partially neglected in order to offer the same or potentially greater financial secrecy and confidentiality. In this respect, the new rules are part of the U.S. government’s more alarming trend to expand the conventional banking system’s financial supervision to cryptocurrencies. This plan was made two months after the cryptocurrency compliance policy was revealed by the Ministry of Justice, which made it very clear that the Ministry of Justice aimed to disrupt cryptocurrency users’ ability to make anonymous transactions.
The framework notes that the simple use of anonymity coins such as Zcash and Monero “indicates possible criminal behavior.” The framework has claimed that cryptocurrency transfers are more difficult to trace by persons with disorderly activities and could be criminally liable for money laundering. Financial authorities, including the National Security Agency, clearly believe that anything criminal is being done by someone wanting to protect their financial privacy.
Decentralized exchanges are also targeted by the system. Decentralized exchanges are basically open source applications that enables individuals to freely share cryptocurrencies with each other without other parties’ interference. The Ministry of Justice specified that these proposals must be registered with FinCEN and must be subject to civil and criminal fines or must ‘collect and retain consumer and transaction data’.
Such notable trends this year include the ruling of the Fifth Circuit that law enforcement authorities should access cryptocurrency exchange financial transaction details without requiring a search warrant, and the plan by FinCEN to reduce the requirement for organizations to acquire and retain transaction data from 3000 U.S. dollars to 250 U.S. dollars (cryptocurrency or fiat currency)
Such innovations are an assault on the right of private internet transfers and an effort to expand the conventional banking system’s comprehensive financial surveillance to cryptocurrencies. Financial documents provide confidential details regarding the personal lives, values, and entities of individuals. Nonetheless, the conventional banking system was subject to intense undocumented financial surveillance by the courts and lawmakers.
Banks are forced to maintain financial documents under the Bank’s Bank Confidentiality Act since these reports are valuable for inquiries. In 1976, without a search warrant, the Supreme Court (in the US v. Miller case) allowed the government to collect bank consumer records. The EFF is worried about the efforts of the U.S. government to extend this surveillance to cover exchanges involving cryptocurrencies.
Cryptocurrency is critical so censorship can be defied. Arbitrary financial filtering has been carried out by many conventional financial intermediaries, closing off links to financial institutions from adult social networks, adult booksellers, and questionable blogs, even though these providers have not broken the legislation.
Recent decisions by US regulators, including this new proposal for a regulation, can weaken the protection of privacy and civil liberties offered by peer-to-peer technology. Before January 4, 2021, the public must send input to the rulemaking. The EFF hopes that, considering the fact that this abrupt deadline is part of the cause, civil liberties organisations and persons who want to maintain their financial privacy will apply their opinions about this proposed regulation.