Treasury’s Proposed “Broker” Rules Expand Surveillance, Well Beyond a “Third Party Doctrine,” According to Coin Center

The US Treasury’s proposed ‘broker’ rules expand surveillance “well beyond a ‘third party doctrine’ that’s already stretched thin,” according to the team at Coin Center, a crypto policy think tank.

Peter Van Valkenburgh, Director of Research at CoinCenter, Board Member at the Zcash Foundation, notes that late last month the Treasury Department “published a proposed regulation to define when a person in crypto qualifies as a ‘broker’ under the tax code and therefore must collect personal information about the users of their crypto tools and report that information to the IRS for tax purposes.”

Coin Center says they are busy readying their comment letter, “due by October, but here is a preview.”

As mentioned in a blog post, the Treasury’s notice of proposed rulemaking is “around 280 pages, but their comment will be pretty simple: As they detailed in a lengthy paper in 2019, the Fourth Amendment makes it unconstitutional for the government to force a private person (as in an individual or business that is not a state actor) to collect and report the personal information of another person if they (a) don’t already collect that information as part of their business, (b) have no reason to collect that information apart from the government demand, and (c) if the target of that information collection does not already voluntarily provide that information to them.”

The firm added that “the standard in Carpenter v. United States, a relatively recent Supreme Court case that overruled significant aspects of the “third-party doctrine,” an interpretation of the Fourth Amendment that, in older cases, allowed similar forms of deputized state surveillance by telephone companies and financial institutions.”

The Court today is “even more poised to further narrow that standard given its current composition, including several justices aligned with Justice Gorsuch, who, in his dissent to the opinion in Carpenter, wrote, ‘I do not agree with the Court’s decision today to keep [the third-party doctrine] on life support’.”

Treasury’s proposed standard is “broader than the standard articulated in the third-party doctrine cases from the 1970s up to the Carpenter case in 2018 (because it allows more people to be forced to collect more information about other people), and it is vastly broader than the new post-2018 standard.”

According to Coin Center, there’s “no way it should survive constitutional scrutiny.”

Coin Center also noted that “what is that broad and unconstitutional standard? Treasury proposes that a person in the crypto ecosystem is obligated to collect user information when they are ‘in a position to know’ their users.”

That standard is far broader than “the constitutional limit set out above.”

If being in a position “to know something was the constitutional standard for deputizing private actors to engage in state surveillance, well, then, it would be game over for the Fourth Amendment.”


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