Could we be on the brink of a surge in confiscation of cryptocurrency by the Internal Revenue Service (IRS)? This question arises as the IRS advances its plans to heighten surveillance on cryptocurrency transactions. A historical document may provide insights into how this data might be utilized. It appears that the Department of Justice (DOJ) may soon be equipped to seize cryptocurrency on an unprecedented scale as the IRS plans to monitor Americans’ cryptocurrency activities through an estimated 8 billion new returns.
The Root of the Matter
The matter can be traced back to a 2022 report by the DOJ in reaction to Executive Order 14067. This order, which was President Biden’s first significant cryptocurrency initiative, initially sparked fears of an impending crackdown. However, it mainly postponed drastic changes, instead requesting agencies to produce reports that would shape future cryptocurrency policies.
The DOJ’s report addressed a wide array of subjects and made recommendations in four major areas:
- Enhancing prosecution capabilities
- Improving investigative methods
- Expanding penalties for cryptocurrency-related crimes
- Increasing resources for government employees
Focus on Cryptocurrency Seizure
What is particularly intriguing is the DOJ’s push for augmented powers to confiscate cryptocurrency. The report emphasizes the need for the United States to possess the authority to seize the proceeds of cryptocurrency fraud to deter such activities and strip violators of their ill-gotten gains. As a result, the DOJ advises expanding its jurisdiction over criminal, civil, and administrative forfeiture.
While the DOJ argues that these modifications are essential due to limitations in the forfeiture tools used to reclaim wrongfully acquired gains, this claim seems perplexing given the government’s track record in seizing cryptocurrency. For instance, between 2014 and 2022, the FBI seized around $427 million in cryptocurrency, and the IRS confiscated another $3.8 billion between 2018-21. With over $4 billion in hand, it’s hard to see the U.S. government struggling to seize cryptocurrency.
The Implication of IRS’s Broker Proposal
However, the IRS’s broker proposal brings a new perspective to the DOJ’s report, considering the extensive surveillance it would likely introduce. This could potentially lead to a significant surge in confiscation of cryptocurrency. A major concern here is the practice of administrative forfeiture, where the seizing agency, not a judge, decides on the forfeiture of a property. In essence, agencies do not need to prove that a crime was committed to confiscate the property.
With the IRS amassing vast data on Americans’ cryptocurrency usage, the DOJ might find expansive new grounds for cryptocurrency confiscation. It’s crucial to note that these confiscations can commence based on mere suspicion, not necessarily proven criminal activity.
As the IRS continues with its proposal, cryptocurrency users should be vigilant about how this data is eventually utilized by the government. To stay updated on these developments, consider using applications like cryptoview.io that provide comprehensive cryptocurrency data.
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Remember, the collection of mass data presents significant risks. Whether it’s the DOJ aiming to expand its confiscation activities, the IRS seeking to increase audits, or a hacker hunting for an exploit, enormous government databases pose attractive targets for both internal and external abuse.
