IRS Plans for Cryptocurrency Surveillance Raise Potential for Greater DOJ Seizures
Summary:
The IRS plans to increase surveillance of cryptocurrency activities, potentially leading to large-scale seizures by the DOJ. This follows a 2022 report, part of President Biden’s first major cryptocurrency initiative, which recommended increasing resources to aid prosecutions and expand penalties for cryptocurrency-related crimes. However, there are concerns that vast data collection could lead to internal and external misuse, prompting a need for cryptocurrency users to monitor government data usage closely.
The Internal Revenue Service (IRS) is moving towards implementing greater monitoring on cryptocurrency activities, understanding a previous report could shed light on the potential practical application of this data. The IRS plans on keeping a close eye on cryptocurrency transactions of Americans, which could amount to 8 billion additional returns. It appears that, with these new measures, the Department of Justice (DOJ) could soon start seizing cryptocurrencies at record-breaking speed.
The initiative originally came from a 2022 report drafted by the DOJ as a response to Executive Order 14067—President Biden's initial big move concerning cryptocurrency. Although it stirred initial fears of a sudden clampdown, the executive order actually took a more measured approach, urging agencies to first prepare comprehensive reports to guide future cryptocurrency policies.
The DOJ's report was comprehensive, homing in on four main areas: enhancing prosecution aids, improving investigations, broadening penalties for cryptocurrency-related offenses, and upscaling available resources for governmental staff.
But for the context of the current debate, the DOJ's push to streamline its capacity to seize cryptocurrency is particularly relevant. The report puts forward that it is crucial for the U.S. to have the go-ahead to confiscate the proceeds from fraudulent cryptocurrency activities to deter wrongdoers and deprive them of their illegally acquired gains. So, the DOJ proposes to augment its authority over civil, criminal, and administrative confiscation.
The DOJ argues that these revisions are essential due to the department's past experiences with cases related to cryptocurrency, stating that the current constraints on the seizure tools limit the restoration of funds to victims.
However, given the government's previous and frequent successful seizures of cryptocurrency, this argument is challenging to validate. The report itself even acknowledges this, referencing seizures of about $427 million in cryptocurrency by the FBI between 2014 and 2022. The IRS added another $3.8 billion seized between 2018-21.
So, holding more than $4 billion, the DOJ's claim that seizures of cryptocurrencies are fraught with difficulties doesn't quite match up with the report's recommendations.
Even then, the IRS's plan to get brokerage firms to share information puts the DOJ's report in a new perspective. It could lead to far-reaching surveillance, which could facilitate increased and rapid cryptocurrency confiscation.
Administrative forfeiture is a major concern. As explained by Nick Sibilla in Forbes, this allows an agency, rather than a judge, to decide if a property should be forfeited. So, properties could be seized without having to prove to a judge that a crime has taken place.
The DOJ has praised administrative forfeiture for proper use of government resources and for not overburdening the federal judicial system. From 2000 to 2019, administrative forfeitures amounted to 78% of all forfeitures by the DOJ.
With the IRS now planning on gaining more information on Americans' cryptocurrency transactions, there could be a sudden surge in the DOJ's ability to confiscate cryptocurrency. Notably, these confiscations could start merely on suspicions, without any concrete proof of a crime. Given the frequent misunderstandings around cryptocurrency and misreported incidents, it's easy to envision how such suspicions could come about.
The IRS proposal, seen in this light, draws attention to the major risks associated with mass data gathering. Be it the DOJ wanting to expand its seizure activity, the IRS seeking to escalate audits or a hacker on the prowl for weak spots, gigantic government databases make attractive targets for internal and external misuse. Should the IRS go ahead with its proposal, cryptocurrency users must keep a close watch on how the government uses this data.
This article provides general information and is not intended as legal or investment advice. The viewpoints expressed are solely those of the author and do not reflect or represent Cointelegraph's views or opinions.
Published At
11/7/2023 9:37:36 PM
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