Bitcoin users who employ the services of virtual currency exchanges to execute transactions may not expect to enjoy more privacy than that accorded to their brick-and-mortar banking counterparts.
The new reality comes in the wake of a US court ruling whose decision implied that Amendment IV of the US Constitution does not protect Bitcoin data. The landmark ruling was made by a three-judge panel from the Fifth Circuit courts, which asserted that Bitcoin transactions implicated in criminal cases cannot be applied to provisions of the US Constitution.
The panel’s decision pulled the argument that crypto exchanges did not differ in principle to traditional banks.
The ongoing case against the convicted felon Richard Gratkowski reinforced the expectation that Bitcoin account balances be treated in the same fashion as that of traditional account balances in court hearings.
Gratkowski, who was convicted in 2019 on charges of procuring child sex abuse material, had challenged the court about the police seizure of his crypto transaction records – by arguing that law enforcement had infringed on his 4th Amendment rights.
Gratkowski Invokes the 4th Amendment in Defense
According to case against Gratkowski, an investigation conducted by the Federal Bureau of Investigation (FBI) revealed that the man used Bitcoin transactions to make payments to a child sex abuse website – he accessed the illicit content between June 2016 and May 2017.
Law enforcement agents discovered the cryptocurrency wallets that the convict had used to send the virtual currency to the online platform. Reportedly, the FBI had subpoenaed Coinbase, the California-based digital currency exchange that Gratkowski used, and accessed information that would enable the agency to unearth the real identities of individuals whose transactions were linked to the illicit website.
The FBI operation would later lead to a raid on Gratkowski’s residence, where law enforcement agents discovered child sex abuse materials held in a hard drive.
In the course of Gratkowski’s court case, the man launched an appeal after his conviction – which argued that the Bitcoin data used in his case was supposed to be protected by the 4th Amendment.
To build his argument, Gratkowski cited the Supreme Court’s 2018 decision on the Carpenter v. United States case where the court ruled in favor of the privacy disposed to historical mobile phone location records.
Distinction Between Physical Currency and Crypto Financial Institutions
The panel of judges from the Fifth Circuit courts rejected Gratkowski’s argument, maintaining that Bitcoin data does not qualify the classification of information that would provide “an intimate window into a person’s life”.
In reflection of the case referenced by the defendant, the court acknowledged that the distinction was clear considering that cell-site location info was expectedly a “pervasive part of daily life”. In addition, the panel highlighted the public nature of Bitcoin’s blockchain data in determination of the 4th Amendment’s contextual relevance.
Further, Judge Catharina Haynes cited the landmark 1939 Supreme Court ruling in the United States v. Miller case by asserting that Coinbase is a financial institution that only differs with traditional banks in the aspect of physical and virtual money.
Otherwise, just as the 1939 court ruling provided that bank records do not enjoy protections by the 4th Amendment, the Gratkowski’s case would be no different.
The Way Forward
Considering that the Gratkowski case is controversial, Bitcoin users can expect to suffer uncertainty as far as future lawsuits are concerned.
While other judges may choose to contradict the latest ruling, it is now clear that Bitcoin data obtained from a cryptocurrency exchange such as Coinbase is not protected by the 4th Amendment of the U.S. Constitution.
Otherwise, for now, Bitcoin users can only wait to assess future court rulings to see whether the latest decision will stand the test of time.