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Protecting Financial Privacy in the Digital Age: Crafting a Stronger Framework

Cato Institute | Nicholas Anthony | May 2, 2023

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  • Financial privacy in the United States has been deteriorating over the past 50 years, with the third-party doctrine and Bank Secrecy Act weakening Fourth Amendment protections.
    • The Right to Financial Privacy Act, enacted in 1978, provides some protections but is undermined by numerous exceptions. A revised legal and regulatory framework must protect against warrantless searches and seizures.
    • Congress should amend the Right to Financial Privacy Act to remove exceptions, requiring government agencies to obtain warrants or subpoenas and notify Americans when accessing their financial information. This is necessary to restore financial privacy, particularly in the digital age.
    • See:  Financial Privacy: SEC Launches Enormous Database Compiling All Stock Trades

  • Several key recommendations to establish a stronger framework for financial privacy in the United States.
    • These include removing exceptions to the protections of the Right to Financial Privacy Act, eliminating 26 U.S.C. Section 6050I, strengthening the formal written requests provisions of the Act;
    • Repealing the Bank Secrecy Act or at least its customer reporting requirements;  R
    • equiring inflation adjustments to reporting thresholds;
    • Publicly reporting the effectiveness of suspicious activity and currency transaction reports; and
    • Enacting protections for two-party transactions, such as peer-to-peer exchanges and self-hosted wallets, to prevent further encroachment of financial surveillance on Americans' privacy.
  • Holding cryptocurrency in a “self‐​hosted” wallet is merely the digital equivalent of holding physical cash in a traditional wallet. It gives the owner complete control over what’s held inside it and, to the extent that they want to do so, the ability to maintain their privacy. Congress should not let financial surveillance further encroach on Americans’ privacy by being expanded to cover self‐​hosted wallets and peer‐​to‐​peer exchanges.

See:  Office of the Privacy Commissioner Announces Digital ID Ecosystem Resolution to Ensure Transparency and Privacy

  • It is time to reconsider the third‐​party doctrine, the reasonable expectation of privacy, and financial privacy. “Having technology” in the 1970s meant having a television and an electric typewriter. Less than 20 percent of families had a credit card issued by a bank.  Today, Americans use credit or debit cards for nearly all purchases, acquire loans directly on their phones, and leave a digital trail nearly everywhere they go. So, while such financial records may have offered only limited insights into one’s life in the 1970s, these financial records now offer a full, detailed representation of one’s life.

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