&l;p class=&q;tweet_line&q;&g;The Supreme Court&a;rsquo;s recent digital privacy decision opens the door to re-challenging the constitutionality of the Bank Secrecy Act, known as the anti-money laundering law, which has posed major problems for legitimate blockchain businesses operating in the U.S.&l;/p&g;
In &l;span&g;&l;em&g;&l;a href=&q;https://www.supremecourt.gov/opinions/17pdf/16-402_h315.pdf&q; target=&q;_blank&q;&g;Carpenter v. United States&l;/a&g;&l;/em&g;&l;/span&g; the Supreme Court did something it rarely does&a;mdash;it carved out a material exception to an established legal doctrine when it decided that the Fourth Amendment&a;rsquo;s protections against unreasonable searches and seizures do apply to cell-phone location data.
The court previously defined the so-called &a;ldquo;third-party doctrine&a;rdquo; in 1976 by concluding that individuals have a reduced expectation of privacy when they knowingly share information with a third party, such as in bank transactions. It created the doctrine in a case challenging the Bank Secrecy Act (BSA) called &l;span&g;&l;em&g;&l;a href=&q;https://supreme.justia.com/cases/federal/us/425/435/case.html&q; target=&q;_blank&q;&g;United States v. Miller&l;/a&g;&l;/em&g;&l;/span&g;. In &l;em&g;Miller&l;/em&g; the court found that there can be no expectation of privacy in financial records held by a bank because &a;ldquo;the Fourth Amendment does not prohibit the obtaining of information revealed to a third party.&a;rdquo;
But in &l;em&g;Carpenter,&l;/em&g; the court narrowed the third-party doctrine from a &a;ldquo;bright-line&a;rdquo; test to one based on the specific facts presented in the case. This means digital-privacy law is now unsettled and evolving, so the court is likely to take up more cases on the topic in the next few years.
The narrowed third-party standard focuses on the breadth of information collected by third-party service providers today, as well as the ubiquity of data collection in modern society. The court emphasized &a;ldquo;the exhaustive chronicle of location information casually collected by wireless carriers,&a;rdquo; deciding that law enforcement cannot have blanket access to that sweeping breadth of information without a warrant (which first requires the government to show probable cause). Further, the court noted that cell phones are &a;ldquo;such a pervasive and insistent part of daily life that carrying one is indispensable to participation in modern society.&a;rdquo;
One could easily make the very same arguments regarding the information banks collect today, since nearly every financial transaction is digital and must be conducted through institutions that comply with the BSA&a;rsquo;s reporting requirements. Banks today &a;ldquo;casually collect&a;rdquo; an &a;ldquo;exhaustive chronicle&a;rdquo; of information, and electronic transactions have made banking a &a;ldquo;pervasive and insistent part of daily life&a;rdquo; and &a;ldquo;indispensable to participation in modern society.&a;rdquo;
The court was careful to note that the &l;em&g;Carpenter&l;/em&g; decision was narrow and did not overturn &l;em&g;Miller&l;/em&g;, but by its reasoning the court opened the door to do just that if presented with a future case based on the sweeping data collection requirements of the BSA&a;mdash;which have been significantly expanded since &l;em&g;Miller&l;/em&g;. Moreover, in 1976, as the court noted in &l;em&g;Miller&l;/em&g;, banks collected only &a;ldquo;limited types of personal information.&a;rdquo; This is a far cry from the blanket information that banks must collect and report to comply with the BSA today, including suspicious activity reports and currency transactions. For example, the BSA requires banks to report every transaction of $10,000 or more&a;mdash;a level that was set in 1970 and remains there, even though it would &l;span&g;&l;a href=&q;https://www.bls.gov/data/inflation_calculator.htm&q; target=&q;_blank&q;&g;equate&l;/a&g;&l;/span&g; to $66,557.67 today if adjusted for inflation. Consequently, the volume of BSA reports has ballooned. The latest &l;span&g;&l;a href=&q;https://www.gao.gov/assets/260/254594.html&q; target=&q;_blank&q;&g;GAO study&l;/a&g;&l;/span&g; (from 2006) found that banks filed 16 million BSA reports and the IRS achieved 296 convictions in 2006, for a paltry conviction rate of 0.002%.
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What does all of this mean for the blockchain sector?
I see three potential implications:
&l;/p&g;&l;ol&g;&l;li&g;The Court&a;rsquo;s reasoning in &l;em&g;Carpenter&l;/em&g; raises questions about whether the crypto sector&a;rsquo;s third-party service providers, such as wallet providers and exchanges (or their customers) could successfully challenge the constitutionality of the BSA if prosecuted for violating it. Just as bank customers do, the customers of cryptocurrency custodial firms leave an &a;ldquo;exhaustive chronicle&a;rdquo; of digital information which these third parties &a;ldquo;casually collect.&a;rdquo; Attorneys could argue the customers have a reasonable expectation of privacy in that information (such as a user&a;rsquo;s IP address, for example).&a;nbsp;&l;a href=&q;https://www.theverge.com/2017/11/29/16717416/us-coinbase-irs-records&q; target=&q;_blank&q;&g;Coinbase litigated&l;/a&g; these issues with the IRS for more than a year in response to the IRS&a;rsquo;s attempted digital dragnet via a &a;ldquo;John Doe&a;rdquo; summons, which sought essentially &l;em&g;all&l;/em&g; information relating to &l;em&g;all&l;/em&g; U.S. customers of Coinbase from 2013-2015. The IRS subsequently narrowed the scope of the summons and in November 2017 a federal district court &l;span&g;&l;a href=&q;https://www.forbes.com/sites/kellyphillipserb/2017/11/29/irs-nabs-big-win-over-coinbase-in-bid-for-bitcoin-customer-data/#4c0f0e89259a&q;&g;ordered&l;/a&g;&l;/span&g; Coinbase to comply with the narrowed summons. Five months ago, Coinbase &l;span&g;&l;a href=&q;https://www.forbes.com/sites/kellyphillipserb/2018/02/28/coinbase-notifies-customers-that-it-will-turn-over-court-ordered-data/#4e7732681431&q;&g;complied&l;/a&g;&l;/span&g;. One wonders whether Coinbase would have continued its fight by appealing to a higher court if the Carpenter decision had come down earlier.&l;/li&g;
&l;li&g;Another category of crypto companies&a;mdash;non-custodial wallet providers and exchanges&a;mdash;is under pressure by federal regulators to comply with the BSA, and if regulators seek enforcement it&a;rsquo;s possible that the constitutional challenge to the BSA may come from among this group of crypto companies. Non-custodial companies do not take custody of client assets and instead merely provide software for clients to use, which means the clients maintain full custody of their cryptocurrencies. Such non-custodial companies expressly avoid taking actions that would classify them as financial institutions and are instead software companies, but they are under pressure to comply with the BSA nonetheless. Litigation related to the BSA has not happened within this category of crypto companies to date.&l;/li&g;
&l;li&g;More generally within the crypto sector the BSA is the root cause of an enormous difficulty faced by start-ups, even if they are only loosely connected to the crypto sector: It is exceedingly difficult for start-ups to open even a basic business banking account. Traditional banks see the crypto sector as high-risk for BSA compliance problems and have shied away in droves from banking it, even for simple services such as payroll and cash management. The difficulty of obtaining and keeping a basic bank account (in U.S. dollars, not in crypto) has helped push blockchain start-ups offshore to jurisdictions that are friendlier to the new technology, such as Switzerland and Singapore.&l;/li&g;
&l;/ol&g;
Net-net, many legal experts expect a flood of litigation to test the Supreme Court&a;rsquo;s newly-narrowed third-party doctrine. It is logical that the BSA will be one of the re-challenged laws and that the crypto industry, which is in the sights of regulators for BSA enforcement actions, may be one source of that challenge. After all, Satoshi Nakamoto&a;rsquo;s original bitcoin white paper dedicated an entire section to &l;span&g;&l;a href=&q;https://bitcoin.org/bitcoin.pdf&q; target=&q;_blank&q;&g;privacy&l;/a&g;&l;/span&g;, and the privacy-focused &l;a href=&q;https://www.activism.net/cypherpunk/manifesto.html&q; target=&q;_blank&q;&g;Cypherpunks&l;/a&g;&a;nbsp;helped Satoshi make bitcoin what it is today&a;mdash;so the industry traces its origins to digital privacy.
&a;ldquo;The government can no longer claim that the mere act of using technology eliminates the Fourth Amendment&a;rsquo;s protections,&a;rdquo; said &l;span&g;&l;a href=&q;https://www.aclu.org/news/supreme-court-rules-police-need-warrant-track-cellphones&q; target=&q;_blank&q;&g;ACLU attorney Nathan Freed Wessler&l;/a&g;&l;/span&g;, who successfully argued the &l;em&g;Carpenter&l;/em&g; case before the Supreme Court. The &l;em&g;Carpenter&l;/em&g; decision, Wessler said, opens the door to safeguarding other sensitive digital information in many future cases, such as emails, smart-home appliances and technology not yet invented.
The Supreme Court emphasized the &a;ldquo;seismic shifts brought about by digital technology&a;rdquo; as part of its reasoning in the &l;em&g;Carpenter&l;/em&g; decision. There is no doubt cryptocurrency technology has introduced entirely new ways to record, store and transfer value digitally. The law may be catching up. Seismic shifts indeed.
Media stories about ADMA Biologics (NASDAQ:ADMA) have trended somewhat positive this week, according to Accern Sentiment. Accern identifies negative and positive media coverage by analyzing more than 20 million news and blog sources in real-time. Accern ranks coverage of publicly-traded companies on a scale of negative one to positive one, with scores nearest to one being the most favorable. ADMA Biologics earned a news impact score of 0.03 on Accern’s scale. Accern also assigned press coverage about the biotechnology company an impact score of 45.3142660303953 out of 100, indicating that recent media coverage is somewhat unlikely to have an effect on the company’s share price in the next several days. 
LPL Financial LLC grew its holdings in Vanguard FTSE Pacific ETF (NYSEARCA:VPL) by 125.3% during the first quarter, according to its most recent disclosure with the Securities & Exchange Commission. The fund owned 179,082 shares of the company’s stock after purchasing an additional 99,610 shares during the period. LPL Financial LLC owned about 0.27% of Vanguard FTSE Pacific ETF worth $13,064,000 at the end of the most recent quarter.