Supreme Court Opened Crypto Wallets To Surveillance

Opinion by: Vikrant Sharma, CEO of Cake Labs

When the United States Supreme Court refused to hear Harper v. Faulkender on June 30, 2025, the court essentially endorsed the Internal Revenue Service’s sweeping “John Doe” summonses for cryptocurrency records.

By letting a lower court ruling stand, the court confirmed that the century-old third-party doctrine stands for public ledgers just as it does for bank statements. Under the third-party doctrine, information voluntarily shared with another party, like a bank or blockchain, is no longer protected by the Fourth Amendment. When data leaves a person’s direct control, constitutional privacy protections vanish.

For onchain transactions, whether permanently etched into any blockchain network, virtually every payment is now fair game for warrant-free scrutiny. Prosecutors, tax agents and, by extension, any adversary with the time to sift through open data can now peruse at their leisure anyone’s financial information.

Analytics profiteers weaponize “radical transparency”

No entity has cashed in faster than blockchain forensics vendors. The global analytics market is projected to hit $41 billion this year, nearly double 2024’s total. Their clustering heuristics already flag over 60% of illicit stablecoin transfers, which — on the surface — is a remarkable statistic, but it also demonstrates how little pseudonymity remains.

The pitch to regulators becomes irresistible: “Pay us, and every wallet becomes a glass bank.” 

Yet the same dragnet slurps up innocent data into eternal spreadsheets bursting at the seams with payroll, medical care and political tithe data. 

That data becomes constantly ripe for leaks or subpoenas. Congress will not ride to the rescue. Only cryptographic engineering can close the breach until lawmakers reinvent privacy for the digital century. 

Some Bitcoin privacy methods let you publish a static receiving identifier while generating distinct, unlinkable onchain outputs that frustrate common analytical heuristics.

Related: US Supreme Court will not review IRS case involving Coinbase user data

Other approaches coordinate inputs from multiple parties in a way that blurs the usual “sender vs. change” patterns analysts look for.

Because these methods avoid custodial mixing pools, applying sanctions levied against Tornado Cash in 2022 is less straightforward.

If wallets and payment services enabled such protections by default, rather than burying them as opt-ins, baseline privacy could become more widely available as encrypted web connections gradually became standard.

Ignore privacy, suffer market fallout

Investors tend to ignore the warning signs until it’s too late, and dismissing protocol-level privacy will have harsh consequences. Emarketer projects consumer payment adoption to surge 82% from 2024 to 2026, but the overlooked fact in that report is that only 2.6% of Americans are expected to pay with crypto by 2026.

Mass uptake remains hostage to perceptions of security and confidentiality, and if coffee shop clerks can link tips to home addresses, mainstream wallets will stall. While that reality sends morality chills down the spines of consumers, institutional allocators look down at the compliance minefields they face.