The right to a self-powered wallet? Crypto laws must be passed by Congress in 2024
To start the new year off on the right foot, many people make resolutions, from losing weight to saving money. The new year is a good time to start something new, so maybe Congress should make some resolutions.
From buying into the Federal Reserve to leveling the playing field for cryptocurrency, there are many options to choose from. However, to avoid the risk of setting too many goals at once, here are five reforms Congress should make this year.
First, Congress must officially confirm that the Federal Reserve does not have the authority to launch a central bank digital currency (CBDC). The Federal Reserve's recently released “Doomsday Book” makes clear that often the Federal Reserve relies on its own discretion rather than the will of Congress. Additionally, statements from Federal Reserve officials have similarly maintained a legal gray area around the authority to issue a CBDC.
Related: Global policymakers are still pushing CBDCs despite setbacks.
What Congress needs to do is amend the Federal Reserve Act to make it clear that the Federal Reserve will not create a CBC or use a CBDC to implement monetary policy. Doing so will not hinder research into CBDCs (as some politicians have alleged) and doing so will set clear boundaries around the Federal Reserve.
Second, Congress must control the overall activities of the Federal Reserve. Although the law requires the Federal Reserve to recoup costs when it launches a new initiative, whether that is happening is an open question. For example, FedNow cost around $545 million to develop, but the cost of participating in the program is expected to be $0. In fact, it is a mystery how and how these costs will be returned.
To solve this problem, Congress should focus on the Depository Institutions Deregulation and Financial Control Act of 1980. Although the title is only lip service, the issue can be easily fixed by amending the law to set a specific time limit for the return of expenses. and requires third-party audits for monitoring.
Third, Congress should clarify what the term “legal tender” means in practice. Too often people get confused by the term and mistakenly assume that others accept US currency when presented. In reality, the dollar's legal tender status refers only to its acceptance for payment of taxes, fines, and contracts. Indeed, the Federal Reserve itself has addressed this confusion on its frequently asked questions page.
Congress could solve most of the problem by simply amending the law to add that “legal tender does not require private businesses, persons, or organizations to accept United States coins or currency in payment for goods and services.” Doing so will help eliminate the confusion surrounding the use of cash, cryptocurrency, foreign currency, and so on.
Fourth, Congress should prevent any agency from restricting the use of self-hosted wallets. Holding cryptocurrency in a self-hosted wallet is the digital equivalent of holding physical money in a traditional wallet. However, some government officials are not happy with the current financial monitoring limits and wanted to intervene in this area. For example, just before Christmas 2020, the Treasury Department published an embarrassing wallet regulation requiring ID from users of self-hosted wallets.
Instead of further increasing financial surveillance, Congress should clarify that interference with transactions between two parties requires a warrant. As the Coin Center explained in its response to the wallet law, these types of hackers pose “a serious threat to personal privacy, Fourth Amendment rights against warrantless searches, and a serious threat to continued responsible innovation.”
Related: Expect new IRS crypto surveillance to come with a slew of controls
Fifth, Congress should remove the laundry list of exceptions from the Financial Privacy Act. Crypto-enthusiasts and civil liberties advocates will be thrilled to learn of the right to financial privacy in the United States. If past history has effectively given the green light to financial surveillance, this law is meant to ensure that financial movements are indeed protected. However, the law has become redundant as it includes a large list of exclusions.
Congress can fix this problem by striking exceptions and leaving the rest of the law as it is. Doing so would only require law enforcement and other government agencies to seek warrants for Americans' financial records. It's true that requesting a warrant makes it difficult for law enforcement and other government agencies, but there are constitutional protections to protect American citizens from arbitrary government power. Eliminating exemptions from the Financial Privacy Act is a check on power.
These five reforms cover a lot of ground. Preventing unauthorized CBC launches, strengthening the Federal Reserve's expansionary tendencies, clarifying legal tender applications, prohibiting restrictions on self-hosted wallets, and establishing financial privacy protections can certainly seem like a tall order. However, each of these goals is relatively easy to implement in the grand scheme of things. If Congress wants to start the new year off on the right foot, any of these reforms would be a good start.
Nicholas Anthony is a policy analyst at the Center for Monetary and Financial Options at the Cato Institute. He Infrastructure Investment and Jobs Act Attack on Crypto: Asking Reason about Cryptocurrency Provisions and the Right to Financial Privacy: Creating a Better Framework for Financial Privacy in the Digital Age.
This article is not intended for general information purposes and should not be construed as legal or investment advice. The views, ideas and opinions expressed herein are solely those of the author and do not necessarily represent the views and opinions of Cointelegraph.
