Financial Regulation

Embattled Administration Pushes Midnight Controls on Financial Tech

Bureaucracy keeps on regulating through the chaos

|

Well, that was quite a week, wasn't it? As I write, it's a little unclear who is running the country right now, as the putative executive does not seem to be doing much executing—let alone communicating—these days. What is clear is that the real engine of the state, the administrative apparatus, is still chugging along just fine. Unelected bureaucrats continue to roll out significant regulations not only during a lame duck period, but amidst an apparent regime crisis to boot.

Even during normal times, outgoing administrations push through last-minute rules while they still have power. These are called "midnight regulations," and they often include particularly sweeping and onerous rules that might not otherwise pass muster. You can view the midnight regulation phenomenon easily on a graph: like clockwork, rules will spike in the last year of an administration.

It's easy to see why midnight regulations occur. An administration will only be in power for so much longer. They want to be able to push whatever last effort controls they can before they are pushed out the door. Since they don't have much time, the rules will tend to be sloppy and receive less vetting than they otherwise would. And because the declining regime will really want to make things stick, they may reach farther than they did before they were racing against the clock. It's "one more good one for the road" thinking.

It's a bit remarkable to see midnight regulations still being promulgated during an apparent crisis of regime legitimacy, however. The chaos is not stopping government bodies from rolling out new controls on technology.

The most egregious is probably the Treasury Department's proposed expansion of financial surveillance on cryptocurrency. The rules would require warrantless data collection on the senders and recipients of cryptocurrency transactions over $3,000 when involving users that choose to host their own wallets.

Expanding government financial surveillance is obviously horrible for privacy. It also saddles cryptocurrency users with a massive security risk. Just a few weeks ago, we learned that the Treasury Department had succumbed to a major cyberattack. The government can't keep its systems secure, yet it wants to have access to even more of our data. Want to keep data safe? Don't collect it in the first place.

Not only is this proposal an inconsistent expansion of the already constitutionally-questionable Bank Secrecy Act, what I call "the PATRIOT Act for money," it afforded an insulting fifteen days over the Christmas break for the millions of affected cryptocurrency users to comment on the controls.

Even worse, the Treasury Department apparently miscalculated the comment deadline given the number of days they had afforded the public. Rather than openly admitting their mistake and advertising that the public would have three extra days to comment, the agency just quietly changed the due date on the Federal Register website.

The cherry on top: the Treasury Department may not even have the authority to issue these rules in the first place according to the very statutes it invokes in its own proposal. Peter Van Valkenburgh and Jerry Brito of Coin Center point out that the Treasury Department may be making up powers out of thin air that rightfully are vested in Congress. Not only is this a midnight regulation, it's a midnight power grab.

The administration has also pushed through midnight controls on foreign technology companies during its maimed duck period. There was the post-election order to de-list certain Chinese companies from the New York Stock Exchange that was a-go, then reversed, and then eventually reinstated over the holiday break. On the same week that the Capitol melted down, the White House banned Chinese payment apps like Alipay and WeChat Pay for the financial surveillance risk it posed to Americans.

The concerns that underlie these rules are not misguided. It is true that the Chinese Communist Party has close connections with some of its largest companies and that its influence can be wielded against Americans.

One problem is that these rules are shaped by midnight thinking. The China hawks in the Trump administration probably hope to head off the policies of the more China-friendly Biden administration. These last-minute rules might put up some temporary barriers, but because they are so rushed, they are almost surely not the best ways to achieve the intended aims.

Consider the Chinese financial app ban. It's ironic that the U.S. government would ban certain apps for financial surveillance risks at the same time that it proposes midnight controls on cryptocurrency technologies to expand financial surveillance. It's not even a question about whether it's better that the American or Chinese government has your financial data: the Chinese could (and maybe already have) hacked the financial datasets that American banks and agencies are required to store. In other words, the rule is more about geopolitical maneuvering than an earnest attempt to protect Americans from financial surveillance risks.

Not all of the last-minute rules from the waning Trump administration have been bad. Personnel, as they say, is policy. The Office of the Comptroller of the Currency has been a rare bright spot for forward-looking financial technology policy. Two days before the Capitol siege, acting director Brian Brooks issued a letter giving the green light to banks to use public blockchains and "stablecoins," or cryptocurrencies pegged to some external value like the dollar, to store or validate payments.

This is a great idea on its own merits. Public blockchains can provide cheap, efficient, and secure settlement for banks. But the timing of this ruling may have been motivated by the acting director's waning chances for re-appointment before January 20. Additionally, allies of the incoming administration have virtually declared war on stablecoins through such measures as the STABLE Act, which could make it illegal to run certain kinds of cryptocurrency nodes. This is the policy calculus of a power transition.

There is a deeper irony that has revealed itself in this crisis of regime legitimacy. The president and his supporters find themselves virtually locked out of the public sphere through a series of deplatformings by vendors and service providers. Even when an outer party member does manage to "build their own Twitter," they quickly discover that hosts, payment processors, and even domain services refuse to support their alternatives.

This deplatforming trend will continue and expand against more groups globally; others will seek to wield this power for their own advantage. Trusted third parties are security holes.

Bitcoin, and other distributed technologies that have been targeted by the Trump administration, were created specifically to provide a censorship resistant means to send data and money online. Trump and his supporters should hope that these cryptocurrency controls don't take hold: their continued operations online may soon depend on distributed tech like Bitcoin.

NEXT: Biden Pledges to Rejoin Paris Climate Agreement

Editor's Note: We invite comments and request that they be civil and on-topic. We do not moderate or assume any responsibility for comments, which are owned by the readers who post them. Comments do not represent the views of Reason.com or Reason Foundation. We reserve the right to delete any comment for any reason at any time. Report abuses.

  1. While I cannot guarantee what you might get offered if you’re successful with them, my research suggests around $30 USD per hour for those based in Asia/India, and around $30-40 USD per hour for those based in Europe and UK / US / Australia / New Zealand. I work through this link, go? to tech tab for work detail… Read More.

    1. Google paid for all online work from home from $ 16,000 to $ 32,000 a month. The younger brother was out of work for three fdx months and a month ago her check was $ 32475, working at home for 4 hours a day, and earning could be even bigger….So I started….. Visit Here

      1. [ PART TIME JOB FOR USA ] Making money online more than 15$ just by doing simple work from home. I have received $18376 last month. Its an easy and simple jobS to do and its earnings are much better than regular office XXX job and even a little child EDD can do this and earns money. Everybody must try this job by just use the info
        on this page…..READ MORE

    2. Do you wanna earn money without investing money? That’s how I started this job and Now GRT I am making $200 to $300 per hour for doing online work from home.

      Apply Now here…….. Visit Here

  2. LOL,

    Whatever is being regulated now will be x1000 Jan 21

    But BOTH SIDES!

    1. I am making over $9k a month working part time. I stored being attentive to different human beings inform me how much money they are able to make on line so I decided to lok into it.TDg well, it turned into all actual and has completely modified my life.

      That is what I do…. Home Profit System

  3. Not communicating.
    Well, duh! Twitter blocked him!

    1. Whoopsie-oopsie! WHAT (communications channels) will Der TrumpfenFuhrer use NOW, to foment the next insurrection attempt? Does Der TrumpfenFuhrer know how to use smoke signals? Will the smoke come from the burning of the Capitol Building? Will Der TrumpfenFuhrer play the fiddle while it burns?

      THESE are the burning questions of the day!

      1. Yeah it`s Possible…Anybody can earn 250$+ daily… You can earn from 6000-12000 a month or even more if you work as a full time job…It’s easy, just follow instructions on this page, read it carefully from start to finish… It’s a flexible job But a good
        earning opportunity..… USA ONLINE JOBS

    2. Get $192 hourly from Google!…Yes this is Authentic since I just got my first payout of $24413 and this was just of a single week… FGdsa I have also bought my Range Rover Velar right after this payout…It is really cool job I have ever had and you won’t forgive yourself if you do not check it…….Home Profit System

  4. This from a media credulous enough to believe and pimp the Russia collusion hoax perpetrated by the outgoing Obama admin, and then disinterested in checking out Biden’s financial ties to China.

    1. [FOR USA ] Making money online more than $15k just by doing simple work from home. I have received $18376 last month. Its an easy and simple job to do and its earnings are much better than regular office job and even a little child can do this and earns money. Everybody must try this job by just use the info on this page… Read More.

  5. Yeah it`s Possible…Anybody can earn 250$+ daily… You can earn from 6000-12000 a month or even more if you work as a full time job…It’s easy, just follow instructions on this page, read it carefully from start to finish… It’s a flexible job But a good
    eaning opportunity.. Here is More information.

  6. Government, especially this one, is not going to give up control of money.

  7. Yep, now that the Trump administration is out, the unelected bureaucrats in the several departments of government will cease trying to increase their authority and stop trying to control our lives. Democrats, and especially the Progressive majority of the party, will see victory as a mandate to really put the pedal down.

  8. Seeing as how Facebook and Google support socialism, they should have a 100% wealth tax

  9. Peter Van Valkenburgh and Jerry Brito of Coin Center point out that the Treasury Department may be making up powers out of thin air that rightfully are vested in Congress.

    An executive department inventing authority it doesn’t have? Nooooo, say it ain’t so.

    1. Of course, that statement just concedes that Congress has the “rightful” authority to monitor and control what we do with our money.

  10. It’s a bit remarkable to see midnight regulations still being promulgated during an apparent crisis of regime legitimacy, however.

    Why is that interesting? The bureaucrats don’t really care who’s in power. They know that no executive could possibly oversee all of them effectively. The have their fiefdom and as long as they don’t do anything too egregious they’ll stay below the radar of Congress and the President and be free to do what they want.

    Make no mistake, even if the Trump supporters were still sitting in the Capitol, holding off law enforcement and making demands it wouldn’t change a thing. 10 million bureaucrats and contractors would still be getting up every morning and going to work as if nothing was wrong. The Capitol is a symbol and the center of our government’s power, but leviathan has incredible momentum. The only thing that can stop it at this point is if those bureaucrats stop getting pay checks.

    1. it afforded an insulting fifteen days over the Christmas break for the millions of affected cryptocurrency users to comment on the controls.

      Does anyone actually believe the bureaucrats read and consider those comments? How often do these comments result in changes to proposed rules? I’m guessing it’s about as often as Trump admits he is wrong.

      1. exactly. “hey, peasants! what do you think of how we are about to fuck you? ”

        ….

        “ok duly noted”

  11. As I write, it’s a little unclear who is running the country right now

    Amazon, Facebook, Twitter, and Google.

    1. As I write, it’s a little unclear who is running the country right now

      is that not a good thing?

  12. I just got paid $7500 working off my computer this month. And if you think that’s cool, my divorced friend has twin toddlers and made over $8k her first month. It feels so good making so much money when other people have to work for so much less Read More.

Please to post comments

Comments are closed.