US Cryptocurrency Act of 2020 Breaches Financial Privacy with Transaction Tracing

The crypto-focused bill was put forward by Representative Paul Gosar (R-AZ) with the intention of providing regulatory clarity through the means of classifying cryptocurrencies into three distinct categories. Regulators need to categorize cryptocurrencies is in order to apply legislation to the different areas within the digital asset realm. This not only helps set up a legal framework, but it also dispels any ambiguity around the operation and usage of such assets within the USA. However, while clarity and legitimization through such an act would be highly prized, there appears to be sacrifices stipulated by the act — especially in regards to financial privacy.

Thank you all for the kind wishes! I’m feeling great today and my staff & I remain asymptomatic.

We may be quarantined, but our work continues! In fact, I just introduced the Crypto-Currency Act of 2020, a bill that my team has worked hard on over the past several months. pic.twitter.com/jaD9CakYqq

— Rep. Paul Gosar, DDS (@RepGosar) March 9, 2020

Under section six of the act, it has been outlined that: ‘The Secretary of the Treasury, notwithstanding section 3(c), acting through the Financial Crimes Enforcement Network, shall issue rules to require crypto-currency (including synthetic Stablecoins) to allow for the tracing of transactions.’

Beware of the “Crypto-Currency Act of 2020” or any kind of legislation which may force businesses to spy on, deanonymize, or micro-monitor customers.

This is an attack on financial privacy, which we will desperately need in the future to safeguard democratic rights and freedoms. pic.twitter.com/B9lDM8lxE4

— Alex Gladstein (@gladstein) March 10, 2020

Cryptocurrency Privacy Backlash

It is unsurprising that there has been a bit of a backlash towards this bill from the cryptocurrency community which, as a whole, values privacy and to an extent, anonymity. The early uses of Bitcoin, and the potential it offered, were related to the protection of financial privacy, and this seems to be at risk under this bill. Undoubtedly, there have been some sacrifices made already in relation to privacy in order to see cryptocurrencies flourish under regulations and law enforcement. However, it is still a principle that is strongly upheld. If this bill was to pass and this framework came into being, it would allow US regulators and law enforcement access to the history of transactions made with cryptocurrency, seemingly in order to stop illicit uses of such digital assets. The section goes on to compare the proposed cryptocurrency regulations with what is already required of financial institutions with respect to fiat currency transactions.

A Worthwhile Sacrifice?

With the act likening transaction tracing to current electronic transaction tracking, it would appear that — at face value — this requirement is no more extreme than what is already witnessed with fiat transactions. However, it would then bring cryptocurrency transactions under a fiat umbrella in this sense and remove the possibility of semi-anonymous transactions. For some, this is a sacrifice not worth making, but for others, the payoff for such an act would be worth it — especially for people looking to use cryptocurrency as part of their daily lives. https://twitter.com/RepGosar/status/1237128165983760387