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(Kitco News) - In early March, U.S. Senators Mark Warner (D-VA) and John Thune (R-SD) introduced the Restricting the Emergence of Security Threats that Risk Information and Communications Technology (RESTRICT) Act in the Senate as a response to the threats posed by the social media platform TikTok to the data security of U.S. citizens.
While lawmakers have been adamant that it will only apply to TikTok, many crypto proponents have voiced concerns that the legislation will eventually be applied to other companies and forms of data, including cryptocurrencies.
According to the U.S.-based think tank CoinCenter, these concerns are warranted as “the language of the bill could potentially be used to block or disrupt cryptocurrency transactions and, in extreme cases, block Americans’ access to open source tools or protocols like Bitcoin.”
CionCenter likened the new Act to the International Emergency Economic Powers Act (IEEPA), which allowed the Treasury’s Office of Foreign Assets Control (OFAC) to prohibit U.S. citizens from transacting with sanctioned entities.
“The RESTRICT Act is conceptually similar to the International Emergency Economic Powers Act (IEEPA), the law that empowers OFAC to block Americans from transacting with sanctioned foreign persons,” CoinCenter wrote. “The Act creates a redundant regime paralleling OFAC without clear justification, it significantly limits the ability for injured parties to challenge actions raising due process concerns, and unlike OFAC it lacks any carve-out for protected speech.”
The think tank said that while it supports the use of OFAC’s powers under IEEPA to block transactions with foreign adversaries, it is concerned that “overbroad interpretation of those powers could be exploited in order to ban Americans from using entire classes of technologies, even when no foreign adversary has an actual proprietary interest in the technology as a whole.”
CoinCenter cited the cryptocurrency mixer TornadoCash – which was sanctioned by the Treasury Department last August, effectively banning U.S. citizens from using the service – as a prime example of this concern.
While they are open to the OFCA using its powers in the instances of Bitcoin transactions involving a specific recipient, such as a sanctioned entity, they would “object to an overbroad interpretation of “interest” wherein the Secretary attempted to argue that the entire class of all Bitcoin transactions, for example, is a class of transactions in which U.S. foreign adversaries have an interest.”
CoinCenter called any such interpretations of the RESTRICT Act “unreasonable and overbroad,” and said it would fight those restrictions in court, just as it is currently fighting the Tordando Cash designation by OFAC.
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Major concerns with the RESTRICT Act cited by CoinCenter include the fact that it doesn’t have a statutory carve-out for transactions dealing primarily in information and protected speech activities, it empowers the Secretary of Commerce to make prohibitions without the need for the President to first declare a national emergency, and it “exempts agency action pursuant to the Act from review under the most relevant sections of the Administrative Procedure Act.”
“A broad and discretionary power to ban and disrupt all manner of information technologies should not be wielded without appropriate oversight and opportunity for review,” CoinCenter wrote. “The RESTRICT Act not only fails to ensure these rule of law protections, in many cases it attempts to subvert them.”
The RESTRICT Act also has no statutory limitations on unconstitutional applications and is “deliberately targeted at restraining transactions related to information and information technologies,” CoinCenter said. “This targeting may mean that the Act is facially unconstitutional, and should it become law we expect it to be challenged as such.”
CoinCenter concluded that the specifics of the RESTRICT Act and its potential constitutional issues “warrant close scrutiny and a cautious approach to ensure that the legislation does not result in unintended consequences for the cryptocurrency ecosystem and Americans’ access to innovative technologies.”
A survey of crypto Twitter shows that the majority of the crypto community sees the Act as a potential threat and has called for the ecosystem to join together in pushing back against its passage.
An example of how the Act’s vague language could be used to attack cryptocurrencies was highlighted by Mario Nawfal, CEO of IBCgroup, who pointed to a statement that said the new guidelines are being implemented in the name of protecting the US "digital economy."
So if CBDC becomes the primary currency it will be ‘critical’ to the US infrastructure.
— Mario Nawfal (@MarioNawfal) April 3, 2023
It means that any alternative digital currency such as crypto would be a threat to the “resilience of the critical infrastructure of the US."
This would then be used to unilaterally ban… pic.twitter.com/N8GecguWIQ
