EU & USA: Massive restrictions against financial privacy!

In recent days, the European Union and the USA in particular have taken significant steps aimed at further restricting financial privacy. The developments affect both the area surrounding Bitcoin and other cryptocurrencies as well as that of traditional cash. For many observers, the current actions of the states are a demonstration of power that could have a clear agenda behind it.

Blocktrainer.de already reported yesterday that the European Union has decided to tighten its money laundering laws. By a large majority, EU parliamentarians voted in favor of a new law that prohibits anonymous cash payments in a business context over 3,000 euros and payments with cash over 10,000 euros in general. In addition, anonymous transactions with cryptocurrencies from externally managed wallets ("hosted wallets") are prohibited in any amount. The measures are aimed at combating money laundering and other illegal activities, but have also met with considerable criticism. Civil rights activist and MEP Dr. Patrick Breyer (PIRATEN) criticizes in particular the excessive surveillance and the resulting threat to financial privacy. His party colleague Anja Hirschel also criticized the procedure accordingly:

'Cash payments are being increasingly restricted and at the same time anonymous online payments are being banned. This leads to ever more detailed traceability of our consumption and private lives. How much I spend on what, when and where allows ever more precise conclusions to be drawn about me as a person. In connection with the national discussions about payment cards for different groups of people, this could be a building block towards a legal basis for subsequent profiling and control of even legal expenditure.
_{Quote from Anja Hirschel}

In the US, there have also been a number of events in the authorities' fight against anonymity in the financial and, in particular, crypto sector, which underline the increasingly hard line taken by state officials.

Probably the most severe example of this is the arrest of the founders of the "Samourai Wallet", a Bitcoin wallet that is primarily known for its data protection functions. The US Attorney's Office has charged Keonne Rodriguez and William Lonergan Hill with serious charges, including operating an unregistered money transfer business that allegedly processed over two billion dollars worth of illegal transactions and laundered over 100 million US dollars from illegal sources, such as darknet marketplaces. This action also reflects the increased efforts of the US judiciary to regulate and monitor financial activities in the crypto sector more strictly - a kind of clear message to all unlicensed and unregistered service providers.

The conflict between the US Securities and Exchange Commission (SEC) and the Ethereum development company Consensys has recently come to a head. At the center of the dispute is the popular wallet and interface for Ethereum, MetaMask. The SEC accuses Consensys of violating US securities laws by operating MetaMask as an unlicensed broker. MetaMask primarily serves as an interface that allows users to manage, transfer and interact with their Ethereum-based cryptocurrencies. However, the SEC argues that some of MetaMask's features, particularly its staking and swap service, could constitute dealing in securities. In the SEC's view, this requires a broker's license, as such activities could fall within the scope of securities legislation.

Consensys has responded to these allegations by filing a complaint in which it argues that MetaMask does not provide brokerage services in the traditional sense. Consensys argues that MetaMask merely provides a user interface that neither manages clients' assets nor executes transactions on behalf of users. The company emphasizes that MetaMask is not involved in the transfer of assets and therefore should not be considered a broker. Consensys' lawsuit also asks the federal court to declare that Ethereum (ETH) should not be classified as a security. In addition, Consensys is seeking a preliminary injunction prohibiting the SEC from conducting any investigation or enforcement action with respect to MetaMask's swap or staking functions.

This case also raises fundamental questions about the nature of digital assets and the limits of regulatory authority. The decision in this litigation could have far-reaching implications for the crypto industry in the U.S., particularly with respect to how crypto assets and the platforms that facilitate their trading should or must be regulated. The stakes are high, both for the crypto community and for the regulatory authorities who fear for their power and position.

The deeper motivation of governments could actually be rooted in the fear of losing their monetary and fiscal control. Given Bitcoin's massive success story, particularly in its function as a new money and store of value that is independent of government control, this fear does not seem entirely unfounded. Many states are struggling with high debt burdens, and the possibility of citizens fleeing into cryptocurrencies massively undermines the ability of states to effectively reduce their debts through inflation. This phenomenon of financial repression includes measures such as forcing low interest rates and holding government bonds that yield below the rate of inflation in order to reduce government debt in real terms.

An important factor in using financial repression to effectively reduce government debt is to combat alternatives. For example, in the USA in the period after the Second World War, when the nation was able to reduce its debt to a large extent by means of repression, private ownership of gold worth more than 100 US dollars was also prohibited.

Blocktrainer founder Roman Reher also expressed the suspicion yesterday at 𝕏 that fear [of losing power and control] is one of the main drivers for the restrictive approach of the states and the financial system. The battle between freedom and financial repression is in full swing and the coming weeks and months will certainly be exciting. For Reher, however, one thing is certain: "Freedom has already won."