The Consolidated Audit Trail (CAT) installation towards the end of May in the year 2024 has triggered significant privacy concerns among crypto users. The CAT involves comprehensive data collection, about which the Blockchain Association and DeFi Education Fund have concerns regarding privacy leakage.Â
The CAT was mandated under SEC Rule 613 after the 2008 financial crisis to help enhance market surveillance capabilities.
Despite not specifically mentioning digital assets in the 351-page rule, crypto groups fear that the SEC’s broad interpretation might classify many crypto participants as brokers or exchanges. This would necessitate them reporting sensitive transaction data to the CAT.
According to these groups, such data collection could transform blockchains into searchable, fully deanonymized databases for government agencies, bypassing traditional legal protections required for accessing personal financial records.
Moreover, the exposure extends beyond government scrutiny. Accessing even one blockchain record could potentially reveal unrelated transaction histories, both past and present. This could place an individual’s complete financial activities under surveillance without their consent.
These concerns were highlighted in an amicus brief filed by the groups in a class action lawsuit against the SEC, spearheaded by the National Center for Public Policy Research.
Concerns escalate with the risk of data breaches. The groups argue that despite increased spending on cybersecurity, the risk of personal data leaks through the CAT is alarmingly high.
Data mishandling, whether by accident or through cyberattacks, could lead to severe privacy violations, affecting millions of crypto users.
The ongoing legal challenges and debates highlight the growing tension between regulatory intentions and privacy rights in the digital age. As this situation develops, the outcome could have far-reaching implications for privacy standards and the regulatory approach toward digital assets.
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