- The IRS is proposing to intensify surveillance on cryptocurrency transactions, potentially leading to a spike in asset seizures by the DOJ without the need for judicial consent.
- A DOJ report highlights the perceived necessity to increase authority to seize crypto assets, despite the government’s prior success in significant asset confiscation.
Understanding the IRS’s Intensified Crypto Surveillance Proposal
As the Internal Revenue Service (IRS) advances its proposal to amplify scrutiny over cryptocurrency dealings, insights from a prior report may signal a surge in government-led asset confiscations. This push comes on the heels of an anticipated influx of 8 billion new tax returns focused on cryptocurrency activity. The Department of Justice (DOJ) is poised to gain enhanced tools for seizing cryptocurrencies at rates previously unseen.
The origins of this enhanced scrutiny trace back to Executive Order 14067, which was President Biden’s inaugural stride into cryptocurrency policy. Initially anticipated to herald a crackdown, the order, in essence, deferred immediate action in favor of informed policy formulation through comprehensive agency reporting on various crypto-related matters.
DOJ’s Position on Cryptocurrency Seizure
The DOJ report, a direct outcome of the executive order, encapsulates a broad spectrum of recommendations aimed at bolstering prosecutions, improving investigations, enhancing penalties for crypto-related offenses, and boosting government personnel resources. Notably, the report underscores the DOJ’s stance on the necessity to broaden its seizure capabilities, arguing the U.S. must possess the power to expropriate assets derived from cryptocurrency fraud, thereby deterring malpractice and dispossessing criminals of their fraudulent gains.
However, the DOJ’s argument for expanded forfeiture authority comes under scrutiny when considering the significant cryptocurrency amounts already seized by law enforcement. The FBI and IRS collectively amassed over $4 billion through such seizures from 2014 to 2021, painting a conflicting picture of the alleged difficulty in asset confiscation suggested by the DOJ.
The Controversial Administrative Forfeiture
The central point of contention lies with administrative forfeiture—a process whereby government agencies, rather than judges, determine the fate of seized property. This mechanism is touted by the DOJ for its efficiency and reduced judicial burden. Yet, the process has faced criticism for bypassing judicial scrutiny, allowing confiscations to proceed on mere suspicion of wrongdoing, which is particularly troubling given the complex and often misunderstood nature of cryptocurrency transactions.
The IRS’s new broker proposal casts the DOJ’s stance in a stark new light, underscoring concerns about the potential overreach of surveillance and the ramifications of unchecked forfeiture. Massive data collection by the government, whether for DOJ confiscations, IRS audits, or as targets for cyber attacks, poses significant risks for abuse.
As the landscape of cryptocurrency continues to evolve under the watchful eye of the IRS, users within the crypto sphere would be prudent to monitor how their financial data may be wielded by the government. With the looming potential for increased seizures, the nuances of this IRS proposal could shape the future of crypto ownership and the delicate balance between regulation and individual financial autonomy.