In a landmark case that marks the first opportunity for the US Supreme Court to consider the Fourth Amendment rights of cryptocurrency users in the context of IRS investigations, the DeFi Education Fund (DEF) filed amicus brief urging the court to consider the unique aspects of encryption technology when evaluating privacy rights.
The case — IRS v. James Harper — revolves around the government ordering cryptocurrency exchange Kraken to provide data related to the cryptocurrency trading records of more than 14,000 people, including Harper, for tax enforcement purposes.
Kraken said it sought to resist the order as it considered it an overreach and the requests could have compromised users’ personal data such as IP addresses, net worth, employment data and sources of wealth.
The outcome of the case is expected to have far-reaching implications at the intersection of digital privacy and law enforcement.
The fourth amendment is about
The DeFi Education Fund argued that the court should consider the differences between cryptocurrency technology and traditional financial institutions (TradFi) when addressing Fourth Amendment concerns.
DEF chief legal officer Amanda Tuminelli said blockchain data gives authorities “an intimate view of an individual’s past, present and future financial life,” which was not possible in the past.
He added that this potentially violates the Fourth Amendment rights of American citizens.
Tuminelli emphasized the importance of protecting privacy rights in the digital age, citing the Supreme Court’s guidance in Kyllo v. United States (2001). She stated:
“When old precedents meet new technology, courts must “ensure the preservation of that degree of privacy against the government that existed when the Fourth Amendment was adopted.”
The DeFi Education Fund’s amicus brief raises three important issues for the court’s discussion.
First, he argued that the court should not treat Fourth Amendment protections differently in cases involving information held by third parties.
The agency contends that Carpenter v. United States (2018) should be considered the most recent and authoritative statement on the “third party” doctrine — effectively limiting the scope of government access to private data.
DEF provided detailed legal analysis in the filing to support its position, noting that the Carpenter decision reduced the relevance of two earlier cases that had previously formed the foundation of the third-party doctrine.
The brief argues that those earlier cases never announced a broad and inappropriate rule and depended on specific limitations that the government cannot demonstrate in this case.
Second, the amicus brief highlighted the unique nature of cryptocurrency transactions, stressing that they are not analogous to traditional banking. Unlike traditional banks, cryptocurrency transactions are recorded on a public ledger, making them traceable to anyone.
DEF claimed that the government’s request for access to cryptocurrency transaction records provides an unprecedented window into users’ financial lives and personal associations.
The lobby group’s legal argument delves into the mechanics of cryptocurrency technology, explaining how pseudonymous addresses and blockchain data allow the government to access a wealth of information about financial activities, associations and many other individuals.
The brief argued that this level of knowledge far exceeds what can be achieved through traditional bank records.
Finally, the brief cites Supreme Court precedents such as Kyllo v. United States and Carpenter to argue that the court must adapt its approach to privacy issues in light of evolving technology.
He argues that the government’s ability to access unlimited unrelated transactions through cryptocurrency technology requires a reassessment of existing Fourth Amendment jurisprudence.
The case has huge implications for the cryptocurrency community and digital privacy advocates. It depends on the delicate balance between the investigative powers of law enforcement and the right of individuals to financial privacy in the digital age.
As the Supreme Court prepares to hear this case, the crypto industry and privacy advocates eagerly await its decision. The final decision is expected to set a precedent for protecting digital assets and personal information in an ever-evolving technology landscape.