As the Internal Revenue Service (IRS) pushes forward with its proposal to increase cryptocurrency surveillance, a past report might offer a clue for how this information may be used in practice. In short, with the IRS set to keep tabs on Americans’ cryptocurrency usage through an expected 8 billion new returns, it seems the Department of Justice (DOJ) may soon have the tools it wants to start confiscating cryptocurrency at an unprecedented rate.
The issue stems from a 2022 report written by the DOJ in response to Executive Order 14067. For those who might not remember, Executive Order 14067 was President Biden’s first major cryptocurrency initiative. Although many people initially feared an impending crackdown was coming, the executive order largely delayed making sweeping changes by first calling on agencies to issue reports to inform future policies around cryptocurrency and related issues.
The report, written by the DOJ, covered a vast range of topics. Largely falling into four categories, the recommendations spanned ways to aid prosecutions, ways to improve investigations, ways to expand penalties for cryptocurrency-related crimes, and ways to increase the resources available for government employees.
What’s most interesting for the present conversation, however, is where the DOJ argued for increasing its ability to seize cryptocurrency.
For example, the report states that “it is critical that the United States have the authority to forfeit the proceeds of cryptocurrency fraud and manipulation as a means of deterring such activity and divesting violators of their ill-gotten gains.” Therefore, the DOJ recommends expanding its authority over criminal, civil, and administrative forfeiture.
The DOJ has claimed these updates are necessary because the department’s experience with cryptocurrency-related cases has “revealed limits on the forfeiture tools used to deprive wrongdoers of ill-gotten gains and, in certain cases, restore funds to victims.”
Yet this argument is difficult to understand considering how much and how often the government has been able to seize cryptocurrency over the years. In fact, the report itself mentions such cases. Between 2014 and 2022, the FBI seized around $427 million in cryptocurrency. The IRS seized another $3.8 billion between 2018-21.
With more than $4 billion on hand, the DOJ’s argument that the U.S. government is struggling to seize cryptocurrency is just not as apparent as the report’s recommendations make it out to be.
Still, the IRS’s broker proposal puts the DOJ’s report into a new light given the vast surveillance that the proposal would likely create — vast surveillance that could be used to start confiscating cryptocurrency at an even greater rate.
The problem is what’s referred to as administrative forfeiture. As Nick Sibilla explained in Forbes when the report first came out, “Under ‘administrative’ or ‘nonjudicial’ forfeiture, the seizing agency — not a judge — decides whether a property should be forfeited.” In other words, agencies do not need to prove to a judge that a crime was committed in order to seize the property.
The DOJ commended this process for promoting an “efficient allocation of government resources” while discouraging “undue burdens on the federal judicial system.” In fact, this process seems to be the DOJ’s preferred practice given that administrative forfeitures made up 78 percent of its forfeitures between 2000 and 2019.
Department of Justice forfeitures by category, 2009-19. Source: Institute for Justice
With the IRS collecting vast amounts of new information on Americans’ cryptocurrency use, it’s possible that the DOJ may “suddenly” find vast new arenas for cryptocurrency confiscation. And again, it’s important to stress that these confiscations don’t have to start with an actual crime being committed—just the mere suspicion.
Given how often misunderstandings surrounding cryptocurrency have fueled headlines, it’s not difficult to imagine how such suspicions could emerge. For example, it was less than a month ago that more than 100 members of Congress cited a flawed report to call for a crackdown on cryptocurrency.
Considering the IRS proposal in this light helps to showcase one of the major risks of mass data collection. Whether it’s the DOJ seeking to expand its confiscation activities, the IRS looking to increase audits, or a hacker seeking out an exploit, massive government databases create tempting targets for both internal and external abuse.
If the IRS pushes forward with its proposal, cryptocurrency users should keep a careful eye on how that data is ultimately used by the government at large.
Nicholas Anthony is a policy analyst at the Cato Institute’s Center for Monetary and Financial Alternatives. He is the 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.
This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
Building society chiefs will this week intensify their protests against the chancellor’s plans to cut cash ISA limits by warning that it will push up borrowing costs for homeowners and businesses.
Sky News has obtained the draft of a letter being circulated by the Building Societies Association (BSA) among its members which will demand that Rachel Reeves abandons a proposed move to slash savers’ annual cash ISA allowance from the existing £20,000 threshold.
The draft letter, which is expected to be published this week, warns the chancellor that her decision would deter savers, disrupt Labour’s housebuilding ambitions and potentially present an obstacle to economic growth by triggering higher funding costs.
“Cash ISAs are a cornerstone of personal savings for millions across the UK, helping people from all walks of life to build financial resilience and achieve their savings goals,” the draft letter said.
“Beyond their personal benefits, Cash ISAs play a vital role in the broader economy.
“The funds deposited in these accounts support lending, helping to keep mortgages and loans affordable and accessible.
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“Cutting Cash ISA limits would make this funding more scarce which would have the knock-on effect of making loans to households and businesses more expensive and harder to come by.
“This would undermine efforts to stimulate economic growth, including the government’s commitment to delivering 1.5 million new homes.
“Cutting the Cash ISA limit would send a discouraging message to savers, who are sensibly trying to plan for the future and undermine a product that has stood the test of time.”
The chancellor is reportedly preparing to announce a review of cash ISA limits as part of her Mansion House speech next week.
While individual building society bosses have come out publicly to express their opposition to the move, the BSA letter is likely to be viewed with concern by Treasury officials.
The Nationwide is by far Britain’s biggest building society, with the likes of the Coventry, Yorkshire and Skipton also ranking among the sector’s largest players.
In the draft letter, which is likely to be signed by dozens of building society bosses, the BSA said the chancellor’s proposals “would make the whole ISA regime more complex and make it harder for people to transfer money between cash and investments”.
“Restricting Cash ISAs won’t encourage people to invest, as it won’t suddenly change their appetite to take on risk,” it said.
“We know that barriers to investing are primarily behavioural, therefore building confidence and awareness are far more important.”
The BSA called on Ms Reeves to back “a long-term consumer awareness and information campaign to educate people about the benefits of investing, alongside maintaining strong support for saving”.
“We therefore urge you to affirm your support for Cash ISAs by maintaining the current £20,000 limit.
“Preserving this threshold will enable households to continue building financial security while supporting broader economic stability and growth.”
The BSA declined to comment on Monday on the leaked letter, although one source said the final version was subject to revision.
The Treasury has so far refused to comment on its plans.
The government has declined to rule out a “wealth tax” after former Labour leader Neil Kinnock called for one to help the UK’s dwindling finances.
Lord Kinnock, who was leader from 1983 to 1992, told Sky News’ Sunday Morning With Trevor Phillips that imposing a 2% tax on assets valued above £10 million would bring in up to £11 billion a year.
On Monday, Sir Keir Starmer’s spokesperson would not say if the government will or will not bring in a specific tax for the wealthiest.
Asked multiple times if the government will do so, he said: “The government is committed to the wealthiest in society paying their share in tax.
“The prime minister has repeatedly said those with the broadest shoulders should carry the largest burden.”
He added the government has closed loopholes for non-doms, placed taxes on private jets and said the 1% wealthiest people in the UK pay one third of taxes.
Chancellor Rachel Reeves earlier this year insisted she would not impose a wealth tax in her autumn budget, something she also said in 2023 ahead of Labour winning the election last year.
Asked if her position has changed, Sir Keir’s spokesman referred back to her previous comments and said: “The government position is what I have said it is.”
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Welfare: ‘Didn’t get process right’ – PM
The previous day, Lord Kinnock told Sky News: “It’s not going to pay the bills, but that kind of levy does two things.
“One is to secure resources, which is very important in revenues.
“But the second thing it does is to say to the country, ‘we are the government of equity’.
“This is a country which is very substantially fed up with the fact that whatever happens in the world, whatever happens in the UK, the same interests come out on top unscathed all the time while everybody else is paying more for getting services.
“Now, I think that a gesture or a substantial gesture in the direction of equity fairness would make a big difference.”
The son of a coal miner, who became a member of the House of Lords in 2005, the Labour peer said asset values have “gone through the roof” in the past 20 years while economies and incomes have stagnated in real terms.
In reference to Chancellor Rachel Reeves refusing to change her fiscal rules, he said the government is giving the appearance it is “bogged down by their own imposed limitations”, which he said is “not actually the accurate picture”.
A wealth tax would help the government get out of that situation and would be backed by the “great majority of the general public”, he added.
His comments came after a bruising week for Prime Minister Sir Keir Starmer, who had to heavily water down a welfare bill meant to save £5.5bn after dozens of Labour MPs threatened to vote against it.
With those savings lost – and a previous U-turn on cutting winter fuel payments also reducing savings – the chancellor’s £9.9bn fiscal headroom has quickly dwindled.
In a hint of what could come, government minister Stephen Morgan told Wilfred Frost on Sky News Breakfast: “I hold dear the Labour values of making sure those that have the broadest shoulders pay, pay more tax.
“I think that’s absolutely right.”
He added that the government has already put a tax on private jets and on the profits of energy companies.