[Op Ed] The Evolution of Financial Privacy and Bitcoin’s Ability To Restore Rights

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Today is a somber day in the United States, particularly for New Yorkers. The events of this date 12 years ago are still fresh in many people’s minds, as are the memories of extreme heroism from fellow residents. Knowing that 9/11 was coming up, I recently visited the memorial at Ground Zero for the first time with some friends visiting from out of town. The space was vibrant and reflective of the events that occurred, but it was impossible for one thing not to stand out above all else: the unbelievable security detail at the venue.

NYPD guard tower at the entrance to the memorial

For those who haven’t been to the memorial, it’s a large, open space with rows of trees and two massive in-ground fountains. It’s beautiful, but that’s just about the extent of it. Yet, for some reason, to enter this open space requires getting through rigorous security. Queuing up to the entrance, visitors are met by large NYPD security towers, as well as NYPD officers on foot. Once in line, tickets are checked, then checked again a bit further down, then all visitors are shuffled into a room to go through airport-style metal detectors. Once out of the room, tickets are checked yet again before being checked a final time when entering the park.

There are cameras approximately every thirty feet throughout this process, often stacked two or more on top of each other. Each visitor likely ends up on close to forty cameras from the time they enter the line to the time they enter the park. What struck me was not just the inordinate amount of security measures, but also the juxtaposition of this hyper-security and the site from which so many measures like this in today’s world are rooted.

NYPD cameras in front of the new Freedom Tower

If I thought our government had the artistic capacity for such a thing, I’d almost be inclined to believe it was a measure to force contemplation about the result of reactionary measures and the balancing act we face every day in society between security and privacy, offering the most profound message of any exhibit in the park.

Since 9/11 the battle between privacy and security is one that has become more important than ever as troves of data become increasingly easy to store and mine. Unfortunately, so long as one or more humans actively wants to hurt another group of humans, such threats will always be a reality. Risk from terrorist activity can never be fully eliminated, yet civil liberties are finite. If we let them chase each other perpetually downwards, there’s only one possible end scenario.

Financial Security

Financial privacy and security have were concerns in the U.S. well before 9/11, but the focus on this debate has escalated dramatically since.

Much of the framework for modern regulations stems from the 1970 Bank Secrecy Act (BSA), passed by Congress to fight money laundering by means of recordkeeping and reporting requirements. Subsequently, in the 1976 landmark case of United States v. Miller, the Supreme Court ruled in that bank records were not protected by the Fourth Amendment, as the Constitution “does not prohibit the obtaining of information revealed to a third party and conveyed by him to Government authorities.”

In response to that ruling, Congress passed the Right to Financial Privacy Act (RFPA) in 1978, granting increased privacy to customers of financial institutions from government searches. It is from extensions of the BSA and depletion of the RFPA that much of the recent erosion of financial privacy in the US stems, particularly as a result of the USA PATRIOT Act passed just weeks after 9/11. The PATRIOT Act revoked a number of key financial privacy provisions in the name of combating terrorism. Since the passage of these rules, their implementation has ballooned dramatically, much to the shagrin of privacy and civil rights advocates.

The use of National Security Letters (NSL) is a prime example of this trend of privacy degradation over time. NSLs are letters from a national intelligence agency requesting non-content information from commercial institutions such as banks or telecom providers without the need for judicial approval. When initially created, companies were not required to comply with NSLs. In 1978, the RFPA made compliance mandatory, but only “where there are specific and articulable facts giving reason to believe that the person or entity to whom the information sought pertains is or may be a foreign power or an agent of a foreign power.”

In 2001, the PATRIOT Act vastly broadened the application of NSLs by changing the language to “relevance to an investigation of international terrorism or clandestine intelligence activity,” while also making it illegal for recipients to disclose so much as the letters’ existence. Not surprisingly, their use has ballooned since then.

An analysis by the Electronic Frontier Foundation found that some 200,000 NSLs were issued between 2003 and 2006, with nearly 60% of the NSLs issued in 2006 for the investigation of U.S. citizens or domestic aliens. It took until 2013 for a judge to rule that prohibiting disclosure of information constitutes a violation of First Amendment rights and that the lack of judicial review proceedings violates the separation of powers. The battle continues to this day, with Google still fighting to disclose greater information about NSLs it receives.

Examples of similar financial privacy depletion, particularly since the events of September 11, are rampant. The PATRIOT Act, for example, allows supervisory regulators to pass the required disclosure and reports of financial institutions on to intelligence agencies. Or there’s the vast amount of data mined from the European SWIFT system by the US government, revealed in 2006 and subsequently deemed illegal. Notably, all of the aforementioned examples were a matter of public discourse even before the latest Snowden/NSA revelations.

There’s even the unintentional tightening of security at the cost of privacy simply by inaction. Per the 1970 Bank Secrecy Act, financial institutions must file a cash transaction report (CTR) with regulators for cash deposits over $10,000, creating a stored record with the government of pieces of an individual’s financial history. That figure hasn’t changed since the law was passed, but the value of the USD has dramatically. As the result of inflation, $10,000 in 1970 is the same as $60,000 today, yet the threshold for reporting remains the same, leading to effectively tighter control and a greater volume of CTRs.

Looking Forward

As evidenced, the erosion of privacy has proven all but inevitable. Instead of continuing along a gradual evolution as we have been, perhaps we need a fresh start. For that reason, one of the most important developments so far in the 21st century may well turn out to be the proliferation of distributed, digital currencies – most popularly embodied in the form of bitcoin. Since it can be stored securely in any denomination by virtually anyone, it enables people to reclaim their property rights.

As you’ll recall from above, a core root of privacy degradation in recent times is the necessity of reliance on third parties to store wealth. As stated in United States v. Miller, it’s the interjection of intermediaries for the purpose of financial security that forces people to forego protection from search and seizure granted to them by the Fourth Amendment. By giving people the ability to securely store money on their own, bitcoin doesn’t just protect wealth from a technological standpoint, it may be able to do so from a legal standpoint as well.

If you have a USB drive with 30,000 BTC on it obtained by legitimate means stored safely in your home, there is no counterparty responsible for reporting requirements and you retain privacy rights to your personal property. It would be no different than storing cash, other than increased the ease and security. While any new paradigm will require adjustments by regulatory bodies, one would be hard pressed to explain anything inherently illegal with the scenario described. Bitcoin, as a personally-securable store of wealth, just may be able to restore some of the most basic rights guaranteed to US citizens that have been all but forgotten by most in the modern era.

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About the author  ⁄ Jonathan Stacke


  • Reply
    September 11, 2013

    Well said!

  • Reply
    September 11, 2013

    I was living approximately 1.5 miles from the impact near Washington DC. I heard it coming in and the smoke from the fuel was so strong I had to shut my windows even though I was over a mile away. About 7 Pm the highway opened and I saw the Pentagon with large amounts of smoke still coming out which lasted well into the next day.

    • Reply
      September 11, 2013

      Milly, what was it like to hear a missile?

  • Reply
    September 11, 2013

    Not sure who you really are, but I can tell by the title of this story your into misleading ppl %100, 911 was a joke and bit coins are a promised fail from the same ppl that brought down the twin towers. You should be very careful because the truth is here and ppl will remember what you did. Do you work for the NSA?

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