US privacy advocates are worried that the 4th amendment does not protect Bitcoin transactions after a court ruled that the FBI agents hadn’t violated the law when they accessed data of Coinbase clients.
Bitcoin Transactions Reveal Deeply Personal Information
A week ago, CryptoPotato reported that a three-judge panel of the Court of Appeals for the Fifth Circuit ruled against the appeal of Richard Gratkowski. He claimed his fourth amendment rights were violated when the federal agents subpoenaed Coinbase and accessed the details of his transactions. Gratkowski is charged with accessing a child pornography website.
The judges claimed that crypto users should not expect to have more privacy than account holders at regular banks do because cryptocurrency transactions don’t reveal sensitive personal data.
However, privacy advocates do not agree with the court’s decision, though they don’t necessarily support Gratkowski in this particular case. They claim that the history of cryptocurrency purchases reveals very personal information about the users, including political and religious beliefs.
Rainey Reitman, chief program officer at the nonprofit Electronic Frontier Foundation, commented:
“The court’s decision relied on outdated precedent that fails to account for the extremely sensitive nature of financial transactions. Before the government can access such deeply sensitive records, it should be required to go to a judge and seek a warrant based on probable cause.”
The appeals court referred to a legal principle called third-party doctrine, which says that an individual shouldn’t have any expectation of privacy in data benevolently shared with third parties like banks. Judge Catharina Haynes explained that both crypto exchanges and banks were subject to the Bank Secrecy Act of 1970, which imposes financial institutions to share records that may provide evidence of money laundering.
Nevertheless, Bitcoin is different, attorney Marta Belcher says. She explained:
“One of the most important things about cryptocurrency is that it imports the civil liberties benefits of cash into the digital sphere by allowing for anonymous transactions. […] The court’s decision that the agents could obtain this sensitive financial data without a warrant sets a dangerous precedent.”
Some People Might Shift to Privacy Coins in the Long-Term
Attorneys were not surprised about the other part of the court’s decision that says Bitcoin traders have no expectation of privacy for data recorded on blockchain. All in all, this was the first time when a US circuit court had ruled on this matter.
Indeed, those who trade Bitcoin can expect that the public, including law enforcement agencies, will have the capability to access the limited information recorded on blockchain, which relates to the amount of moved funds, the time of the transactions, and the addresses of both parties.
In the end, the court behaved as if it left the topic open for debate as soon as criminal defense lawyers revisit the issue later to decide whether crypto exchange data should enjoy 4th amendment protection in the case when cryptocurrencies are adopted widely.
Brian Klein, a trial attorney at Baker Marquart LLP, concluded:
“I don’t think this decision is going to discourage people from using Bitcoin, but long-term, it’s likely that some people will shift to cryptocurrencies that have more privacy enhancements.”
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