Expect new IRS crypto surveillance to come with a surge in confiscation
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.
Related: Bitcoin beyond 35K for Christmas? Thank Jerome Powell if it happens
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.
Related: IRS proposes unprecedented data-collection on crypto users
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.
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.
Standard Chartered-backed Zodia Custody has exited its Japan venture with SBI Holdings after two years, with both firms calling the move a strategic realignment.
MPs are demanding Peter Mandelson appears on British soil to give evidence on his relationship with paedophile Jeffrey Epstein.
But there is frustration within parliament at Lord Mandelson’s ability to avoid scrutiny, as Sir Keir Starmer faces mounting pressure to sack him as ambassador to the US over his links to the deceased billionaire.
It comes after it emerged the Labour peer, who has said he wishes he had never met Epstein, had written him a 2003 birthday note in which he described him as his “best pal”.
According to reports in Bloomberg and The Sun, he also sent Epstein messages of support while he was being investigated for sex offences, telling him he was “following you closely and here whenever you need”.
Politics Hub: Follow the latest from Westminster
Sky News has learned that the powerful Foreign Affairs Select Committee of MPs made a request to hear from Lord Mandelson after he was appointed by Sir Keir last year, but this was blocked by the Foreign Office.
Lord Mandelson‘s status as a member of the House of Lords means the committee cannot force him to appear before them. People overseas can also not be compelled to give evidence.
Committees have the power to summon people to give evidence and find them in contempt of parliament if they do not comply.
Lord Mandelson’s failure to appear adds to the controversy around a lack of government transparency sparked by the decision to not let national security adviser Jonathan Powell give evidence to the Joint Committee on the National Security Strategy.
Mike Tapp, the Home Office minister, told Sky News that it is “important we have full answers” on Lord Mandelson’s relationship with Epstein.
Asked if he should face the scrutiny of parliamentary committees, Mr Tapp said: “What is important to me, and I’m really clear on this, is we do have the full answers on this.
“But Sir Keir Starmer has been clear yesterday in the House that all of the answers are there.”
Conservative MP and FAC member Aphra Brandreth is the only person on the committee to publicly call for Lord Mandelson to give them evidence on the ambassador’s links to Epstein.
Sky News understands that others on the committee are keen for Lord Mandelson to speak to them, but have decided not to go public. As the committee make-up mirrors that of parliament, most members are Labour MPs.
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Beth’s breakdown: PM grilled over Mandelson
Read more on Mandelson:
Starmer backs his ambassador
What was his relationship with Epstein?
The disconnect between his claims and letters to Epstein
Ms Brandreth said in a statement: “At a time of huge instability around the globe, it’s vital that the UK’s ambassador to the US is focused completely on his job
“As a member of the Foreign Affairs Committee, I would welcome the opportunity to question Lord Mandelson on his ability to carry out his duties to the UK.”
She shared a letter written by fellow Tory MP and former Foreign Affairs Select Committee chair Alicia Kearns.
In the letter, Ms Kearns called on current chair Dame Emily Thornberry to summon Lord Mandelson, question him and put the concerns of MPs to him.
Ms Kearns also wants to know what questions Dame Emily has asked the Foreign Office since the appointment of Lord Mandelson, and to find out “how substantial” his relationship with Epstein was.
Ms Kearns told Sky News: “Months and months have passed with no action from the chair of the Foreign Affairs Committee, instead, there has been an unsettling silence from her on all things Mandelson.
“I would have summoned Mandelson long ago, it’s the chair’s duty to get the answers parliament deserves. It’s all too evident Thornberry has long been focused on her next role, not the one she’s been elected and paid to do.”
In January, Dame Emily raised Lord Mandelson’s appointment with Foreign Office minister Stephen Doughty.
She said the appointment was “inspired” – before asking the minister and government to “allow Lord Mandelson the time to come before my committee before he leaves for the United States”.
Mr Doughty said: “I am sure that we will consider any request that my right honourable friend makes in due course in the normal way in which we consider requests from her committee.”
The FCDO has been approached for comment.
Sky News’ deputy political editor Sam Coates reports that the lead civil servant in the Foreign Office, Ollie Robbins, has written to Lord Mandelson to ask a series of questions.
These questions include: When did you last meet Jeffrey Epstein before he took his own life? When did you last accept hospitality? What were your last business dealings with?
It is not known if Lord Mandelson will respond.
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Will Lord Mandelson have to be replaced in US?
Meanwhile, Labour MPs Andy McDonald, Bell Ribeiro-Addy and Kim Johnson have called for Sir Keir to sack Lord Mandelson.
The SNP’s Westminster leader, Stephen Flynn, also urged the prime minister to remove Lord Mandelson without further delay – warning his “reputation is now on the line”.
But a source within diplomatic circles who has known Lord Mandelson told Sky News correspondent Rhiannon Mills they believe the US ambassador “can ride it out”.
“Unless there is worse to come, if he can stomach the attention, he can ride it out. In the UK residence in Washington, with its grounds and security, it is easy to hide away,” the source said.
“The most important part of Mandelson’s role as ambassador is his relationship with the US administration, they will not be the least bit fussed about this. They have bigger problems.
“This isn’t going to be a big story in the States as the focus is on Trump and dozens of other prominent American figures. The US press have lots of other fish to chase”.
MPs are demanding Peter Mandelson appears on British soil to give evidence on his relationship with paedophile Jeffrey Epstein.
But there is frustration within parliament at Lord Mandelson’s ability to avoid scrutiny, as Sir Keir Starmer faces mounting pressure to sack him as ambassador to the US over his links to the deceased billionaire.
It comes after it emerged the Labour peer – who has said he wishes he’d never met Epstein – had written him a 2003 birthday note in which he described him as his “best pal”.
According to reports in Bloomberg and The Sun, he also sent Epstein messages of support while he was being investigated for sex offences, telling him he was “following you closely and here whenever you need”.
Politics Hub: Follow the latest from Westminster
Sky News has learned that the powerful Foreign Affairs Select Committee of MPs made a request to hear from Lord Mandelson after he was appointed by Sir Keir last year, but this was blocked by the Foreign Office.
Lord Mandelson‘s status as a member of the House of Lords means the committee cannot force him to appear before them. People overseas can also not be compelled to give evidence.
Committees have the power to summon people to give evidence, and find them in contempt of parliament if they do not comply.
Lord Mandelson’s failure to appear adds to the controversy around a lack of government transparency sparked by the decision to not let national security adviser Jonathan Powell give evidence to the Joint Committee on the National Security Strategy.
Conservative MP and FAC member Aphra Brandreth is the only person on the committee to publicly call for Lord Mandelson to give them evidence on the ambassador’s links to Epstein.
Sky News understands that others on the committee are keen for Lord Mandelson to speak to them but have decided to not go public. As the committee make-up mirrors that of parliament, most members are Labour MPs.
Please use Chrome browser for a more accessible video player
Beth’s breakdown: PM grilled over Mandelson
Read more on Mandelson:
Starmer backs his ambassador
What was his relationship with Epstein?
The disconnect between his claims and letters to Epstein
Ms Brandreth said in a statement: “At a time of huge instability around the globe, it’s vital that the UK’s ambassador to the US is focused completely on his job
“As a member of the Foreign Affairs Committee I would welcome the opportunity to question Lord Mandelson on his ability to carry out his duties to the UK.”
She shared a letter written by fellow Tory MP and former Foreign Affairs Select Committee chair Alicia Kearns.
In the letter, Ms Kearns called on current chair Dame Emily Thornberry to summon Lord Mandelson, question him and put the concerns of MPs to him.
Ms Kearns also wants to know what questions Dame Emily has asked the Foreign Office since the appointment of Lord Mandelson, and to find out “how substantial” Lord Mandelson’s relationship with Epstein was.
Ms Kearns told Sky News: “Months and months have passed with no action from the chair of the Foreign Affairs Committee, instead there has been an unsettling silence from her on all things Mandelson.
“I would have summoned Mandelson long ago, it’s the chair’s duty to get the answers parliament deserves. It’s all too evident Thornberry has long been focused on her next role, not the one she’s been elected and paid to do.”
So far, there has been no response from Dame Emily, who took part in a hustings for her campaign to be the next Labour deputy leader on Wednesday night.
Some MPs on the committee are concerned this race has distracted Dame Emily from her role on the committee, though she looks unlikely to make it into the next round.
In January, Dame Emily raised Lord Mandelson’s appointment with Foreign Office minister Stephen Doughty.
She said the appointment was “inspired” – before asking the minister and government to “allow Lord Mandelson the time to come before my Committee before he leaves for the United States”.
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Mr Doughty said: “I am sure that we will consider any request that my right honourable friend makes in due course in the normal way in which we consider requests from her Committee.”
The FCDO has been approached for comment.
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