A new bill introduced in late May in the United States Senate would require people entering or leaving the United States with $10,000 or more in cryptocurrency to declare their holdings to US Customs and Border Protection agents. The bill has been introduced in the 115th Congress as S.1241, and known as the Combating Money Laundering, Terrorist Financing, and Counterfeiting Act of 2017. Currently this regulation is already applied to cash and money orders. The bill’s prime sponsor is Republican Senator Chuck Grassley of Iowa. The bill has some bipartisan support, co-sponsors of the bill include Democratic Senator Dianne Feinstein of California, Democratic Senator Sheldon Whitehouse of Rhode Island, and Republican John Cornyn of Texas.
Cryptocurrencies are not the only thing which would be subject to disclosure to border agents under the new bill, as prepaid mobile phones, coupons, and gift vouchers would also be subject to disclosure. Failure to disclose cryptocurrency holdings worth over $10,000 would be punishable by criminal penalties that include up to 10 years in prison, as well as be subjected to civil asset forfeiture. Civil asset forfeiture is a process which enables government to take property without a criminal conviction, and sometimes even without an arrest. Civil asset forfeiture is different from criminal asset forfeiture in that under civil asset forfeiture your property can be seized without being convicted of a crime. Law enforcement agencies are able to keep what they seize under the civil asset forfeiture process. Many people have called for the reform of asset forfeiture laws, and some privacy activists have called the practice of civil asset forfeiture unconstitutional, a violation of the 4th amendment’s protection from unreasonable searches and seizures.
The bill also expands the surveillance state by authorizing customs agents to conduct wiretaps on people that they suspect may be transporting “excess” cryptocurrency holdings. If the bill is enacted, within 18 months the Secretary of Homeland Security and the Commissioner of the US Customs and Border Protection agency will deliver a report to Congress outlining their strategy for detecting and interdicting cryptocurrencies, as well as an assessment of what infrastructure is needed to implement their strategy. Under the proposed legislation, cryptocurrency exchangers like Shapeshift, as well as coin tumbler services, would be defined as financial institution under the Bank Secrecy Act. The Bank Secrecy Act is an anti-money laundering law which as enacted in 1970 and was amended by Title III of the USA PATRIOT Act.
An almost identical version of this legislation was introduced in 2011 and failed to pass. It is likely the legislation was originally intended to target centralized digital currency exchanges such as Liberty Reserve, which was shut down by the federal government in 2013. The legislation does not define “digital currency” or differentiate between centralized and decentralized digital currency, unlike FinCEN and the Department of Treasury, which has clearly defined terms for “centralized virtual currency” and “decentralized virtual currency”.
Many cryptocurrency advocates say the bill is unnecessary as FinCEN has already released guidance and regulations on cryptocurrency. “While we encourage thoughtful and meaningful study of the prevention of cross-border financial crime, the storage of virtual currency carries different and complex considerations than those attributable to prepaid access,” President of the Chamber of Digital Commerce Perianne Boring told CoinDesk. The Chamber of Digital Commerce and Coin Center, two of the biggest lobbying firms in Washington DC that advocate for cryptocurrency, are currently in contact with legislators to discuss the bill. The bill is currently being considered in the Senate Committee on the Judiciary.
Shortly before this bill was introduced in the United States Senate, the United States House of Representatives’ Homeland Security Committee’s Subcommittee on Counterterrorism and Intelligence began working on changes to a proposed bill by Representative Kathleen Rice of New York. Rep. Rice’s bill would call for the Under Secretary of Homeland Security for Intelligence and Analysis to create a threat assessment on how people could use cryptocurrencies to further terrorist activity.