A controversial new Congressional bill regarding digital currency has just been introduced by Sen. Chuck Grassley (R-IA). The bill would require the Secretary of Homeland Security to work with the Commissioner of U.S. Customs and Border Protection in order to put forward a "border protection strategy to interdict and detect prepaid access devices, digital currencies, or other similar instruments, at border crossings and other ports of entry for the United States." This bill, if passed, would have significant implications for digital currency holders around the world.
Background of U.S. Bill S.1241
The proposed bill, designated U.S. Bill S.1241, was introduced on May 25 of this year and co-sponsored by Sen. Diane Feinstein (D-CA), Sen. John Cornyn (R-TX), and Sen. Sheldon Whitehouse (D-RI). The bipartisan group of Senators who have put the bill forward hope that it will deter individuals entering the United States from bringing in undetected and undeclared assets in the form of digital currencies such as Bitcoin and Ethereum.
A portion of the bill stipulates that the Department of Homeland Security and the U.S. Customs and Border Protection agency would devise "an assessment of infrastructure needed to carry out the strategy" of blocking these undeclared funds from entering the country. The Secretary of Homeland Security and the Commissioner of U.S. Customs and Border Protection would be required to present their findings to Congress within 18 months of the passage of the bill.
Implications for Travelers
Travelers entering the United States at the border are already obligated to declare any currency holdings of $10,000 or more, regardless of whether or not custom officials might have the means to detect those holdings. While digital currencies occupy a somewhat unusual place in many portions of finance law, a report by Smaulgld suggests that the situation is relatively clear in this case. Because digital currencies technically accompany a holder anywhere that he or she goes, including across a border, that traveler would need to declare his or her entire cryptocurrency portfolio every time he or she enters the United States. This is different from the requirements of travelers who hold bank accounts and/or precious metals valued at more than $10,000 which are stored outside of the country.
How would the federal government develop an infrastructure to detect foreign holdings including digital currencies? It is possible that the Foreign Account Tax Compliance Act could be expanded to regulate foreign cryptocurrency exchanges. Alternatively, a global monitoring system could be put in place to watch over blockchain ledgers. Beyond that, there are a number of measures that agencies could take at the border to deter travelers from withholding information, including extreme vetting systems and harsh penalties for nondisclosure. Regardless, it is safe to assume that the cryptocurrency community, famously opposed to central regulation, will have something to say about this bill.