Taking Stock of Restrictive Financial Policies and Expansionary Government
Financial freedom is under fire. Policies like the Digital Asset Anti‐Money Laundering Act, the Credit Card Competition Act, the Consumer Financial Protection Bureau’s slew of price controls, and Basel III reforms are designed to increase financial surveillance, dictate prices, and tell businesses how to operate. To make matters worse, some of these policies are already projected to cost financial institutions billions of dollars per year (Table 1).
Yet, it can be difficult to recognize what is taking place when the attacks are scattered and often hidden in the weeds of legislative text, dense regulations, and specialized jargon. Therefore, let’s take a brief look at some of the things that have been put on the table as of late to see how policymakers are seeking to restrict the market and expand the government within the realm of monetary and financial policy.
6050I Reporting
From the Infrastructure Investment and Jobs Act of 2021, a new surveillance regime began (but was temporarily paused) at the start of 2024 that requires transactions of $10,000 or more in cryptocurrency to be reported (along with personal information) to the government within 15 days of the transaction under 26 U.S.C. § 6050I. Failure to file, incorrect information, or missing information may result in a $25,000 fine or five years in prison.
Basel III Endgame
Basel III Endgame refers to a proposal from the Federal Reserve, Federal Deposit Insurance Corporation, and Office of the Comptroller of the Currency that calls for US financial institutions to increase the amount of capital on their balance sheets—removing that capital from profitable uses. As Norbert Michel has warned, the “new requirements will impose higher costs on these banks and possibly put them at a disadvantage to foreign‐based banks.”
Capping Credit Card Interest Rates Act
The Capping Credit Card Interest Rates Act, if enacted, would establish an 18 percent interest rate cap on credit cards. In other words, the bill would establish price controls for credit cards. As Norbert Michel warned, “Regardless of the politics, price controls are harmful policies that tend to hurt the people they’re supposedly designed to help. Credit markets are not an exception to this rule.”
Central Bank Digital Currency (CBDC)
According to the Human Rights Foundation’s CBDC Tracker, 11 countries and the 8 islands in the Eastern Caribbean Currency Union have launched CBDCs; 37 countries and Hong Kong have CBDC pilot programs; and 65 countries, 2 currency unions, and Macao are researching CBDCs. The United States is currently in the pilot phase. Despite governments pushing forward, CBDCs risk threatening financial privacy, freedom, and markets.
Credit Card Competition Act
The Credit Card Competition Act, if enacted, would give the Federal Reserve the power to blacklist companies from the payments sector, impose price controls on transaction fees, and decide what services credit card networks could provide. In other words, it effectively calls for central planning and price controls in credit markets rather than letting competition among issuers determine the best outcome.
Credit Card Late Fee Price Controls
As part of the Biden administration’s “war on junk fees,” the Consumer Financial Protection Bureau (CFPB) issued new regulations to restrict fees charged for late credit card payments from a maximum of $25 on the first late payment and $35 for subsequent late payments to just $8. Furthermore, the CFPB called for the removal of inflation adjustments so that the fees effectively become $0 over time.
Crypto Asset National Security Enhancement and Enforcement (CANSEE) Act
The CANSEE Act, if enacted, would broadly define terms to create sweeping surveillance, potentially violate the First Amendment, and give the Treasury the authority to effectively prohibit cryptocurrency use in the United States. Combating financial crimes does pose a challenge, but sacrificing the constitutional rights that the United States was built upon is no solution.
Cryptocurrency Broker Reporting
The Internal Revenue Service (IRS) proposed new surveillance requirements for cryptocurrency users under the Infrastructure Investment and Jobs Act of 2021. Simply put, the proposal would require a sweeping surveillance program, set a huge burden on small businesses, and put cryptocurrency at a disadvantage when used for payments. The IRS estimates this requirement would result in Americans filing eight billion new returns if the proposal is enacted.
Digital Asset Anti‐Money Laundering Act
The Digital Asset Anti‐Money Laundering Act, if enacted, would establish sweeping surveillance over Americans using cryptocurrency. The bill calls for self‐hosted wallets, miners, validators, and network participants to be classified as money service businesses. The bill would also prohibit banks from using mixers or handling cryptocurrencies that have been run through mixers in the past. Finally, the bill would require new surveillance to cover the use of cryptocurrency ATMs.
Nonsufficient Funds Fee Price Controls
As part of the Biden administration’s “war on junk fees,” the CFPB proposed banning banks from charging nonsufficient fund fees for debit, ATM, and peer‐to‐peer payments that are immediately declined. The CFPB openly acknowledged that these fees are rare but argued that it needed to proactively ban the practice in case banks turn to the fees in the future.
Operation Choke Point 2.0
Like how the original operation under the Obama administration was used to pressure politically controversial businesses, many worried that the Biden administration was doing the same to target cryptocurrency—a sort of Operation Choke Point 2.0. As Nic Carter documented at the time, government officials were increasingly pressuring banks for any involvement with cryptocurrency. If nothing else, the experience showcased the vast discretionary powers that regulators wield.
Overdraft Fee Price Controls
As part of the Biden administration’s “war on junk fees,” the CFPB proposed new regulations to restrict the fees charged when people overdraft their accounts. The proposal seemingly ignores that overdraft protection is optional and that competition has improved these services (and reduced fees) over time. As with the CFPB’s other price controls, these restrictions are likely to result in a reduction of financial services.
Politically Driven Financial Surveillance
Concerns have emerged that the Financial Crimes Enforcement Network, or FinCEN, has been using politically charged terms to drive financial surveillance. Suspected terms include “MAGA,” “Trump,” and the like. In February 2024, the Department of the Treasury denied using keywords to target individuals but confirmed that banks were instructed to review payments for messages including political terms to search for individuals that participated in the January 6, 2021, capital riot.
The Treasury’s Financial Surveillance Request
The Treasury Department reportedly asked Congress to introduce legislation to (among other things) designate decentralized finance service providers, noncustodial wallet providers, cryptocurrency miners, and validators as “financial institutions” under the Bank Secrecy Act. As Jennifer Schulp and Jack Solowey warned in their analysis of the proposal, “Such unworkable compliance requirements would amount to de facto bans on US crypto activity.”
Conclusion
This list is not exhaustive, but these examples should provide a better sense of just what is at stake and why it’s important to be vigilant—even in one of the freest countries in the world. It may not always be obvious, but Americans’ financial privacy and financial freedom are regularly under fire.