Will Congress Destroy Bitcoin’s Privacy?

Before this week, very few investors had ever heard of the “Combating Money Laundering, Terrorist Financing, and Counterfeiting Act of 2017.” In its original form, the bill had little to no bearing on the equities markets, bond markets, real estate, or any other common asset class that investors care about. 

But that all changed this week.

As is often the case with lawmakers in Congress these days, the provisions in this bill are seemingly being changed at the last second. In this case, the way the proposed law is now being discussed by lawmakers suggests that they are intent on “criminalizing the intent of concealed ownership” of digital currencies. That language alarmed many in the cryptocurrency world, as it seemed apparent that Congress was coming after bitcoin. 

That’s why The Satoshi Revolution author, Wendy McElroy, called the bill is a “pit bull assault on bitcoin freedom.” 

At issue here is whether or not law enforcement can track money laundering cases tied to cryptocurrencies. The answer, generally speaking, is no. Because cryptocurrencies are not recognized and regulated like currency, and because of the privacy features of many cryptocurrencies, law enforcement has a much more difficult time tracking the movement and ownership of bitcoin or any other cryptocurrency. 

To amend that, Congress wants to increase law enforcement’s scope of authority with regards to ‘financial institutions,’ which besides business models like banks and credit unions, they now want to include “an issuer, redeemer, or cashier of prepaid access devices, digital currency, or any digital exchanger or tumbler of digital currency.” All in all, it seems pretty clear that Congress has cryptocurrency in its crosshairs.

The Bigger Bitcoin Storyline that No One is Talking About

If Congress changes this bill to include cryptocurrency, it does not necessarily imply the end of privacy in bitcoin. But what it does mean is that Congress is now exploring ways to enter the cryptocurrency markets to regulate them, and if history tells us anything, when Congress starts regulating industry things can get messy. This will a storyline to continue watching closely.