The US proposes a new law which, if adopted, will require everyone crossing US border to declare their bitcoins worth over $10k. The offenders will face criminal charges.
Why do I think this initiative has pretty good chances to see the light of the day? Because United States has a long record of nailing down companies and individuals suspected of illegal activities with a faint connection to the US. Especially if it brings a lot of money to US treasury. Think of FCPA, for example. But first things first.
No crypto-laundering, please
So, the US Senate suggested a bill S.1241, which modernizes laws to combat money laundering and terrorist financing that will make criminally liable anyone intentionally concealing ownership or control over a digital currency. Wow. Let this sink in for a minute…
This may not only influence US citizens but also the global community, your company or you personally if you accept payments in cryptocurrencies or just own some.
If you doubt about how far US authorities can go to reach you, just recall the case of Mr. Firtash, who was officially indicted in the US in 2014 for being behind the bribery of Indian public official to get a contract for coal mining.
You may think there probably were some substantial grounds for applying US laws to the Ukrainian rich man allegedly bribing someone in India. Well, the grounds for extraterritorial use of US legislation boiled down to (a) company used US dollars to give the bribe, and (b) Mr. Firtash used the US cell phone operator to make calls.
Yes, that’s enough for US authorities to say they have authority over you. You can find more details and examples in the post I wrote earlier about FCPA fines.
So, what’s similar with cryptocurrencies anyway? With the law S.1241 in place, using the inventive logic of the given example US authorities could go after any person in the world who owns cryptocurrency and crossed US border. The ultimate goal could be not really putting you in jail but have a leverage over you, or just to replenish the state budget by imposing fines.
You may ask how US authorities could possibly know that one owns bitcoins? And some cryptocurrencies are anonymous, right? That’s why they are so popular. Your wallet address is anonymous until… you buy coins at the cryptocurrency exchange.
As the vivid example of why one should not rely too much on the anonymity may serve the recent US court case, in which the San Francisco judge ruled that Coinbase (one of the world biggest cryptocurrency exchanges) must provide to IRS (US tax authority) the identifying information on users who had more than $20,000 in annual transactions between 2013 and 2015.
It seems that the main advantage of bitcoin backfires. The uncrackable bookkeeping spread across the wide network of computers could be used in a way supporters did not want it to be used - to report to the state.
Travel safe and think ahead
So, if you own some cryptoassets, be ready to declare them in the future if you want to travel safely. The mentioned draft law indicates that the US is about to take quite a strict approach to monitoring people who own cryptocurrencies. And it will be applicable not only to US citizens but for the rest of the world too.
Dmytro currently holds the position of Innovation Justice Agent at the Dutch foundation with the focus on brining more justice to society through innovations and legal tech solutions. Previously he worked in a Dutch law firm and Ukrainian multinational companies providing legal support to science-backed technological industries like pharmaceutical and clinical trials industries.
Dmytro obtained his LL.M. degree with distinction from Tilburg University, the Netherlands, in International Business Law. In his Master thesis he researched on compulsory licensing of patents. He also attended the Summer School on European Business Law at Heinrich Heine University, Germany and completed an intensive training on social innovation and entrepreneurship from the Social Innovation School in Eastern Europe.