*This writing is a Blog post. It is not a published IPTF Journal article.
Mira Ward
When James Madison wrote the Fourth Amendment, he likely never predicted that 250 years later, Americans would argue for privacy over Bitcoin transactions.[1] During the Revolutionary War, the Fourth Amendment protected American colonists from unwarranted searches and seizures.[2] In 1967, the Court built upon Fourth Amendment jurisprudence in Katz v. United States.[3] Katz specified that a person must have a “reasonable expectation of privacy” to protect their interest from search and seizure.[4] For example, Katz ruled that a reasonable privacy interest exists over that which is physically enclosed from the public, such as a conversation in a telephone booth.[5] Today, decentralized finance enthusiasts and cybercriminals alike fight for a right to privacy over blockchain, arguing that layers of online encryption entitle cryptocurrency transactions to a reasonable expectation of privacy.[6]
Cryptocurrency is––as the name suggests––encrypted digital money.[7] Cryptocurrency exchanges advertise safe, secure, and private services, but in reality, cryptocurrency transactions are simply pseudonymous.[8] A full record of participant identities is available on each cryptocurrency’s public ledger, called a blockchain.[9] The participants involved in a cryptocurrency transaction are identified by a series of numbers and letters that comprise a participant’s blockchain “address.”[10] With the correct decryption software, governments and internet-users alike can trace a given blockchain address back to the identity of the individual.[11]
At present, legal scholars question whether the Third Party Doctrine should protect cryptocurrency transactions.[12] The Third Party Doctrine arose out of United States v. Miller (1976) as an exception to the Fourth Amendment reasonable expectation of privacy.[13] In United States v. Miller (1976), the Supreme Court held that a bank client had no reasonable expectation of privacy in bank slips entered into the stream of commerce.[14] Miller established that the Fourth Amendment does not protect information voluntarily surrendered to a third party or otherwise present in a public record.[15]
The introduction of crypto mixer technology complicates whether the Third Party Doctrine applies to cryptocurrency and other blockchain assets.[16] Crypto mixers are downloadable software tools that randomize the sequence of blockchain addresses on a ledger.[17] Crypto mixers randomize the order of people participating in a cryptocurrency transaction by inserting random blockchain addresses as false intermediaries in a mixed funds exchange.[18] Seeking total anonymity, dark web participants and threat actors often use crypto mixers when purchasing illicit goods or laundering ransom for a malware attack.[19] Because crypto mixers are popular among bad actors, most US jurisdictions place strict limits on their usage to deter cybercriminals.[20] Despite these restrictions, mixers remain widely used throughout the US.[21]
New legislation might stall the growing popularity of crypto mixers. The House of Representatives introduced the Blockchain Integrity Act in early May, 2024.[22] The Act aims to “place a 2-year moratorium on financial institutions handling, using, or transacting with funds routed through digital asset mixers and to require the Secretary of the Treasury to carry out a study of digital asset mixers.”[23] In 2023, the Financial Crimes Enforcement Network (FinCEN) identified crypto mixers as a major concern for money laundering and terrorism financing.[24] In light of concerns from federal financial crime investators, the Blockchain Integrity Act is a proactive and protective statute that, if passed, would help safeguard personal information, enhance national security in an increasingly digital economy, and prevent financial crimeamidst the White House’s push to integrate digital assets into mainstream finance.[25]
United States v. Gratkowski (2020) is the most recent and authoritative blockchain privacy ruling. DefendantGratkowski purchased child pornography from a website financed with Bitcoin.[26] When law enforcement became aware of the website, the Third Party Doctrine allowed them to subpoena Coinbase (a cryptocurrency exchange) for the identities of individuals who purchased child pornography from the website.[27] After Gratkowski was identified, law enforcement subsequently obtained a search warrant and seized incriminating evidence from his home to present in court.[28] Gratkowski moved to suppress the evidence on the grounds that he has a reasonable expectation of privacy in encrypted transactions.[29] The Court disagreed, finding that Coinbase transaction records, like bank records in Miller, were voluntarily shared with a third party (Coinbase), and Gratkowski assumed the risk that Coinbase could have provided the information to authorities.[30] By contrast, cryptocurrency exchanges can no longer access a customer’s Bitcoin transactions once they put their funds through a crypto mixer.[31] The use of crypto mixers could allow cybercriminals like Gratkowski to circumvent the traditional Third Party Doctrine.[32]
Further, crypto mixers hinder law enforcement’s ability to establish probable cause for a search warrant.[33] Law enforcement obtains probable cause when it has reason to believe that a crime has been committed, which is a fact specific determination.[34] On a blockchain, the government uses Anti-Money-Laundering (AML) filters on blockchain forensics softwares like Chainalysis or i2 Enterprise to “flag” addresses suspected of money laundering.[35] However, mixers scramble the destination of funds and erase the sender’s digital footprint.[36] Thus, “flagged” addresses could be innocent blockchain users who were inadvertently implicated in a crypto mixer obfuscation process.[37] This makes identifying criminal activity difficult, and complicates the probable cause doctrine.[38]
As blockchain technologies and obfuscation tools rapidly develop, the United States needs to pass new legislation to preserve the Third-Party Doctrine and maintain a channel for law enforcement to establish probable cause where suspect information would otherwise be anonymous.[39] Passing the Blockchain Integrity Act is essential for cybercrime mitigation and internet safety.[40]
[1] Veronica Lark, Building Blocks of Privacy: Why the Third-Party Doctrine Should Not Be Applied to Blockchain Transactions, 74 Fed. Comm. L.J. 1 (2022), http://www.fclj.org/wp-content/uploads/2022/06/74.3.2_Building-Blocks-of-Privacy_Proof-2.pdf.
[2] Id.
[3] See Katz v. United States, 389 U.S. 347, 88 S. Ct. 507 (1967) (expanding upon the meaning of privacy interest).
[4] Id.
[5] See id. (highlighting that conversations held in private, enclosed areas are specifically protected by the constitution).
[6] See Sina Eskandari, Seyed Ali Khayam & Jeremy Clark, SoK: Transparent Dishonesty: Front-Running Attacks on Blockchain, IET Blockchain (2023), https://ietresearch.onlinelibrary.wiley.com/doi/10.1049/blc2.12036 (last visited Apr. 13, 2025) (describing methods of physical and digital forensics).
[7] When Might Blockchain Appear in Your Court?, National College of Probate Judges,https://www.ncsc.org/__data/assets/pdf_file/0018/14913/blockchaininthecourts.pdf (last visited Mar. 24, 2025).
[8] Id.
[9] Id.
[10] See id. (explaining the mechanics of blockchain ledgers).
[11] Id.
[12] See Lark supra note 1 (questioning whether blockchain addresses complicate the Doctrine).
[13] United States v. Miller, 425 U.S. 435, 96 S. Ct. 1619 (1976).
[14] See id. (establishing the Third Party Doctrine).
[15] Id.
[16] Chainalysis Team, Crypto Mixers, https://www.chainalysis.com/blog/crypto-mixers/ (last visited Mar. 23, 2025).
[17] Id.
[18] Mixing Detection on Bitcoin Transactions Using Statistical Patterns, Wiley Online Library, https://ietresearch.onlinelibrary.wiley.com/doi/10.1049/blc2.12036 (last visited Mar. 24, 2025).
[19] See id. (detailing what activities law enforcement associates with crypto mixer technology).
[20] Id.
[21] Id.
[22] H.R.8266 – 118th Congress (2023-2024): Blockchain Integrity Act, H.R.8266, 118th Cong. (2024), https://www.congress.gov/bill/118th-congress/house-bill/8266.
[23] Id.
[24] FinCEN, FinCEN Proposes New Regulation to Enhance Transparency in Convertible Virtual Currency Mixing and Combat Terrorist Financing,
https://www.fincen.gov/news/news-releases/fincen-proposes-new-regulation-enhance-transparency-convertible-virtual-currency (last visited August 4, 2025).
[25] Id.
[26] See United States v. Gratkowski, 964 F.3d 307 (5th Cir. 2020) (establishing that blockchain does not offer a right to privacy).
[27] See id. (describing the method of subpoenaing a cryptocurrency exchange).
[28] Id.
[29] Id.
[30] Id; See 425 U.S. 435 supra note 13 and accompanying text.
[31] See 964 F.3d 307 supra note 26 and accompanying text; 425 U.S. 435 supra note 13 and accompanying text.
[32] See 964 F.3d 307 supra note 26 and accompanying text.
[33] See 425 U.S. 435, supra note 13 and accompanying text.
[34] See Lark, supra note 1 at 362 (explaining the origins of the Amendment).
[35] Chainalysis Team, Crypto Mixers and AML Compliance, Chainalysis (2022), https://www.chainalysis.com/blog/crypto-mixers/ (last visited Mar. 23, 2025).
[36] See Eskandari, Khayam & Clark supra note 6 (describing methods of physical and digital forensics and noting the almost complete erasure of a digital footprint offered by mixer technology).
[37] Id.
[38] Id.
[39] See Blockchain Integrity Act, supra note 22 (noting rapidly developing encrypted technologies).
[40] Id.