Coin Center warns 'draconian' surveillance policies could still drive crypto investors from US

The non-profit crypto industry research and advocacy group Coin Center published its analysis of the crypto policy landscape following Donald Trump's re-election to the U.S. presidency earlier this month. In the post, the group acknowledges that Trump's crypto policy will likely lead to a more friendly regulatory environment for many in the industry, especially centralized players, though some thorny issues will likely persist. 

Coin Center's concerns mainly involve what the organization describes as "surveillance issues," from tax reporting obligations to criminal investigations of the developers behind non-custodial crypto tools such as Tornado Cash and Samourai Wallet. While overzealous regulation regarding "investor protection" issues, namely how much control the SEC and CFTC have over digital assets, can threaten the crypto industry, "the threats from the surveillance arena have lately been more profound," the organization claims. 

The organization said there are three "top threats" to the freedoms of crypto users and developers: the crypto reporting requirements under Section 6050I of the U.S. tax code, the sanctions against Ethereum mixer Tornado Cash, and criminal charges for unlicensed money transmission brought against the developers behind Tornado Cash and other non-custodial and privacy-enhancing protocols such as Samourai Wallet. 

"The [Department of Justice] may change under a Trump administration, but it rightly guards its political independence and may therefore be unlikely to abandon these prosecutions because of a change in administration," Peter Van Valkenburgh, Coin Center's research director, wrote in the post.

While the organization says the incoming Trump administration taking a different approach to surveillance issues is "less certain" than when it comes to investor protection issues, there may be progress "... if it becomes increasingly clear that even with a friendlier SEC, draconian surveillance and control policies will continue to drive innovators away from the US, chill development, and deny ordinary Americans the benefits of these technologies."

The organization also argues that the ongoing approach to surveillance issues does "very little to actually prevent criminals and terrorists" from using the tools in question. 

The Roman Storm trial

Originally scheduled to begin next month, the trial of Tornado Cash developer Roman Storm will instead commence in April 2025 following a delay granted by Judge Katherine Polk Failla to allow both sides to hash out an issue regarding expert witnesses. Storm's legal battle has been closely followed by those in the crypto industry; Coin Center previously argued in an amicus brief that the case should be dropped, partially on First Amendment grounds. 

To argue that Tornado's founders colluded with North Korea's Lazarus hacking group, as is alleged in the indcitment, would be like suggesting "the developers of the Linux open-source operating system confederated with the regime of Iran, merely by freely releasing a valuable computing tool that Iran would later use to operate computers related to its weapons programs," the amicus brief states . 

"Bills like  the Blockchain Regulatory Certainty Act would offer a legislative solution to the unlicensed money transmission prosecutions and we’re ready to find a bipartisan path forward for its passage," the recent post states. Coin Center also noted that it has active litigation regarding the tax reporting requirements and Tornado Cash sanctions. 

"In the long arc of history, America’s constitutional rights, in particular our reverence for free speech and our wariness of warrantless search and seizure, should guarantee that there is no better place to build and use cryptocurrencies and open blockchain networks," the organization wrote.