How Long Can Bitcoin Stay Anonymous? Feds Close In On Cryptocurrency

In the furor over Bitcoin’s soaring value, it can be easy to forget some of the more practical benefits of cryptocurrency. Donald Trump’s treasury department, however, has been hard at work drafting new regulations that could force cryptocurrency infrastructure in the U.S. to track the identity of its users, making anonymity a thing of the past.

Cryptocurrency advocates are already raising objections. The Electronic Frontier Foundation, a California-based digital rights organization, called the proposal “a midnight regulation” to stifle free exchange. It also said the assertion that tracking is necessary to deal with threats to the U.S. has “no factual basis.”

The regulation is yet to be implemented but has a comment period of only 15 days that coincides with the winter holidays. The proposal does say the Federal Reserve will “endeavor to consider” comments received after that period.

If the regulations are approved, it would have a number of effects. Interactions involving cryptocurrency exchanges would be tracked even if the other party uses a self-hosted wallet. Anonymity aside, that could make it more difficult simply to use distributed infrastructure like smart contracts, a blow to proponents of decentralized finance.

EFF says that tracking exchanges could also result in the collection of personal information well beyond what the regulation purportedly condones.

This is part of a larger push again cryptocurrency by the Trump administration, which published a cryptocurrency enforcement framework in October that characterizes any use of private currency as “indicative of possible criminal conduct.”

“It’s abundantly clear that the DOJ wants to undermine the ability of cryptocurrency users to transact anonymously,” says the EFF’s initial assessment of the changes, noting that the Hong Kong protests have to deal in cash to avoid government retribution for ongoing pro-democracy protests.