A U.S. nonprofit civil rights group has accused the U.S. Treasury Department of infringing the rights of cryptocurrency holders using private wallets to store their digital assets.
In a press release on Monday, the New Civil Liberties Alliance (NCLA) said the department is engaging in an "unconstitutional power grab" that could lead to a "massive collection" of individuals' personal information.
In December, a bureau operating inside Treasury known as the Financial Crimes Enforcement Network (FinCEN) proposed a rule requiring crypto exchanges to collect counterparty information from transactions sent to "unhosted wallets" dubbed "Requirements for Certain Transactions Involving Convertible Virtual Currency or Digital Assets."
Under the rule, cryptocurrency exchanges would need to maintain personal data on transactions above $3,000. In the event a transaction is over $10,000, the exchange would need to gather, store and report it to FinCEN.
The nonprofit filed comments on Monday objecting to the rule, claiming it "represents a radical extension of FinCEN’s financial surveillance of innocent Americans." March 29 marks the last day the regulator is taking public comments on its proposed rule.
NCLA said the move could widen the scope of the Bank Secrecy Act as digital assets would fall into the monetary instruments category of regulated currencies, according to the release.
Further, the nonprofit is arguing the proposed rule goes beyond appropriate constitutional limits by bolstering FinCEN's to "exercise Congress' exclusive legislative power."
“FinCEN’s proposed rule unlawfully attempts to transform the agency’s limited authority to regulate banks into permission to engage in the mass financial surveillance of innocent individuals who merely use digital assets," said NCLA Litigation Counsel Caleb Kruckenberg.
"FinCEN ought to recognize that its proposal would be grossly unconstitutional and promptly scrap this rule,” Kruckenberg said. Failing to do so would prompt the group to "file suit to protect Americans’ civil liberties," according to the group's comments.
The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.