The Internal Revenue Service (IRS) is pushing forward with its proposal to increase cryptocurrency surveillance, potentially giving the Department of Justice (DOJ) the tools it needs to start confiscating crypto at an unprecedented rate. This follows a 2022 DOJ report in response to President Biden’s Executive Order 14067, which called on agencies to issue reports to inform future policies around cryptocurrency.
The report covered a range of topics, from aiding prosecutions to expanding penalties for crypto-related crimes and resources for government employees. One of the most interesting aspects was the DOJ’s argument for increasing its ability to seize cryptocurrency. It recommended expanding its authority over criminal, civil, and administrative forfeiture, claiming it is necessary to deprive wrongdoers of ill-gotten gains and restore funds to victims.
Despite the recommendation, the U.S. government has already been able to seize cryptocurrency at a significant rate – between 2014-2022, the FBI seized $427 million and the IRS $3.8 billion.
The IRS proposal creates the potential for the DOJ to take advantage of mass data collection to start confiscating crypto without the need for an actual crime to be committed. This is concerning, as misunderstandings surrounding crypto have fueled headlines, such as when more than 100 members of Congress cited a flawed report to call for a crackdown.
Mass government databases are tempting targets for both internal and external abuse, and if the IRS proposal goes ahead, crypto users should monitor how the information is used by the government. Nicholas Anthony, a policy analyst at the Cato Institute’s Center for Monetary and Financial Alternatives and author of ‘The Infrastructure Investment and Jobs Act’s Attack on Crypto: Questioning the Rationale for the Cryptocurrency Provisions’ and ‘The Right to Financial Privacy: Crafting a Better Framework for Financial Privacy in the Digital Age’, stresses the importance of this.