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Crypto Groups Push for ‘Pro-Privacy Future’ in Incoming Congress

Jan. 10, 2023, 12:00 PM

A coalition of cryptocurrency-related organizations is urging US lawmakers in the new session of Congress to prioritize data protections when developing legislation to promote “a pro-privacy future.”

“Lawmakers have failed to protect our digital privacy for far too long, leaving market solutions as the only practical defense anyone has against unreasonable and constant digital surveillance,” said Lia Holland, campaigns and communications director at the digital rights nonprofit Fight for the Future, which organized an open letter released Tuesday.

Signatories to the letter, addressed to incoming lawmakers, include crypto wallet provider Ledger, the developer of privacy-protecting digital currency Zcash, and peer-to-peer crypto payment platform MobileCoin.

The recent collapse of crypto exchange FTX is expected to put pressure on lawmakers to establish guardrails for the emerging industry. Crypto advocates champion the decentralized technology’s potential for allowing private transactions online that are more akin to the anonymity of cash. They worry that regulatory steps so far risk eroding one of cryptocurrency’s key features.

Fight for the Future has come out against a bill introduced in the last Congress that seeks to combat the use of digital assets for money laundering and terrorism financing. The Digital Asset Anti-Money Laundering Act would require customer identity checks by digital wallet providers and other related businesses, while limiting the use of tools like mixers that are meant to make cryptocurrency transactions more anonymous.

In 2022, the US Treasury Department imposed its first-ever sanctions on virtual currency mixers—first Blender, and then Tornado Cash—over their use by hackers to launder money. The bipartisan infrastructure bill that became law in 2021 also targeted cryptocurrency transactions with new reporting requirements.

These measures amount to financial surveillance that could have a chilling effect on the development of privacy-preserving digital asset technologies, according to Fight for the Future.

Its letter calls on Congress to support technologies such as end-to-end encryption, a means of secure communication that has come under scrutiny from law enforcement agencies that say it shields criminal activity. The letter also presses for passage of “long overdue” legislation focused on safeguarding consumer privacy online.

Lawmakers in the last Congress’s legislative session made some progress toward advancing a bipartisan online privacy bill along with two other bills centered on children’s experience online, but the measures stalled over opposition from key lawmakers.

To contact the reporter on this story: Andrea Vittorio in Washington at avittorio@bloombergindustry.com

To contact the editors responsible for this story: Tonia Moore at tmoore@bloombergindustry.com; Jay-Anne B. Casuga at jcasuga@bloomberglaw.com