Are Crypto Investments Really Private? IRS Says “No!” – DeFi Education Fund (DEF) Says “Not So Fast!”

2 min read


The IRS is notorious for taking extreme measures when it comes to tax enforcement. In his appeal to the U.S.
Court of Appeals, Coinbase investor James Harper presents this particular case. The DeFi Education Fund (DEF), who submitted an amicus brief outlining additional considerations to take into account when assessing the Fourth Amendment, concurs with him that the IRS has overreached itself. In the piece that follows, Lidia Yadlos, Editor-in-Chief and Creative Director at Blockbuster, offers some perspective on this matter in the article below


Cryptocurrency advocates, represented by the DeFi Education Fund (DEF), have submitted an amicus brief to the U.S. Court of Appeals, urging the court to consider the unique aspects of blockchain technology when evaluating the Fourth Amendment privacy rights of cryptocurrency users.

DEF supports James Harper’s appeal against the IRS, aiming to prevent the U.S. government from having unrestricted access to cryptocurrency users’ transaction history, arguing that the Fourth Amendment should be adapted to balance law enforcement’s investigative powers with individuals’ financial privacy rights in the digital era.

The case — IRS vs. James Harper — revolves around the government ordering cryptocurrency exchange Coinbase to provide data related to cryptocurrency transaction records of more than 14,000 people, including Harper, for tax enforcement purposes.

Coinbase said it tried to fight back against the order as it considered it an overreach of authority, and the requests could have compromised users’ personal data like IP addresses, net worth, employment data, and sources of wealth.
The case outcome is expected to have far-reaching implications for the intersection of digital privacy and law enforcement.

Fourth Amendment Concerns

The DeFi Education Fund argued that the court must 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 provides authorities with “an intimate view into a person’s financial life in the past, present, and future” that has not been possible before.
She added that this potentially violates the Fourth Amendment rights of American citizens.
Citing the Supreme Court’s guidance in Kyllo v. United States (2001) she stated:

“When old precedents meet new technology, courts must ‘assure preservation of that degree of privacy against government that existed when the Fourth Amendment was adopted.’”

Amanda Tuminelli, DEF Chief Legal Officer

Twitter Thread Details

The DeFi Education Fund’s Twitter thread provided additional insights into the case. They argued that Coinbase’s “Staking Program” cannot constitute an investment contract as it is fundamentally different from traditional investment schemes.
The thread also highlighted the organization’s request for the Court to grant Coinbase’s motion for judgment on the pleadings.

Legal Analysis

The DeFi Education Fund’s amicus brief raises three significant considerations for the court’s deliberation.
First, it argued that the court should not treat the Fourth Amendment protections differently in cases involving information held by third parties.
The organization asserts 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.
Second, the amicus brief underscored the unique nature of cryptocurrency transactions, emphasizing that they are not analogous to traditional banking. Unlike traditional banks, cryptocurrency transactions are recorded on a public ledger, making them traceable by anyone.

“The government’s request to access cryptocurrency transaction records provides an unprecedented window into users’ financial lives and personal associations.”

DeFi Education Fund (DEF)

Third, the brief invokes Supreme Court precedents, such as Kyllo v. United States and Carpenter, to argue that the court must adapt its approach to privacy concerns in light of evolving technology.
It contends that the government’s ability to access unlimited unrelated transactions through cryptocurrency technology necessitates a reevaluation of existing Fourth Amendment jurisprudence.

Significance of the Case

The case holds immense significance for the cryptocurrency community and digital privacy advocates. It hinges on the delicate balance between law enforcement’s investigative powers and individuals’ right 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 ruling is expected to set a precedent for protecting digital assets and personal information in an ever-evolving technological landscape.
For additional details, you can refer to DEF’s amicus brief here.

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