The FAIR Act: Protecting Bitcoin Holders from Government Overreach

With the US Government stating that civil asset forfeiture will form a key pillar in building its Strategic Bitcoin Reserve

A few weeks ago, we briefly touched on how civil asset forfeiture may apply to Bitcoin, a process in which the Government may seize citizen’s assets without accusing a person of a crime. With the US Government stating that civil asset forfeiture will form a key pillar in building its Strategic Bitcoin Reserve, the Fifth Amendment Integrity Restoration Act of 2023, also known as the FAIR Act, is arguably the most important Bill introduced in Congress today to protect Bitcoin holders from extensive Government overreach. Without it, many may see their bitcoin seized and forfeited on behalf of the Reserve with little to no recourse.

Civil asset forfeiture has long been argued to be in need of drastic reform. Across the country, states have become known to abuse the process to enrich their own law enforcement agencies, which may appropriate the funds collected. From police seizing a Vietnam veteran’s van for serving as a “container” for marijuana, or attempting to appropriate a man’s life savings over a seat belt violation, civil asset forfeiture is “one of the gravest abuses of power in the country today,” according to the Institute for Justice.

Civil asset forfeiture is particularly problematic as the process creates a financial incentive for law enforcement to forfeit citizen’s property to the Government without due process, as stated by the ACLU. Especially in light of bitcoin’s scarcity and its consequent value appreciation over time, this financial incentive is only exacerbated when civil asset forfeiture is applied to build the Strategic Bitcoin Reserve.

To protect citizens from civil asset forfeiture abuse, the FAIR Act of 2024, which was reintroduced in 2024 co-sponsored by Sen. Lummis, among others, aims to revise the federal laws that govern the process to ensure that civil asset forfeiture proceedings follow due process as governed by the Fifth Amendment.

First, it does so by raising the evidentiary standard from “preponderance” of evidence – meaning that a party’s claim is rather true than not – to clear and convincing evidence, increasing the burden of proof the Government has to provide to enforce a forfeiture.

With the FAIR Act, enforcing agencies have to establish that there was a substantial connection between the property and the offense as well as that the owner of any interest in the seized property used the property with intent to facilitate the offense, or knowingly consented or was willfully blind to the use of the property by another in connection with the offense. This forms the most important aspect of the Act as it applies to bitcoin.

At the moment, the Government could seize a person’s legally acquired bitcoin if the UTXO itself had, for example, previously been used in sanctions evasion or touched a darknet market; regardless of whether its owner was aware of the coin’s history when obtaining it. By introducing active consent and willful blindness, the FAIR Act prerequisites that the owner of bitcoin to be forfeited was aware of the acquired BTC’s origins for forfeiture to apply.

The FAIR Act also requires the Government to appoint a counsel to property owners who are financially unable to obtain representation, or if the cost of obtaining representation would exceed the value of the seized property – an issue that has arguably kept many from contesting the forfeiture of assets in the first place, as civil asset forfeiture effectively reverses the burden of proof. At the moment to get your property back you need to prove the Government wrong instead of the Government having to make a case against you.

“Civil asset forfeiture allows federal law enforcement to seize the property of Americans who haven’t even been charged with or convicted of a crime. Under this system, police can keep cash, cars, and even homes based on mere suspicion of a crime. These losses often become law enforcement’s profit because the burden is on the property owner to prove they should get their property back.” said Sen. Booker, who introduced the Bill together with Sen. Rand Paul.

“The government should never have the power to seize a person’s property without due process. Yet, under current civil asset forfeiture laws, Americans are being stripped of their property without ever being charged or convicted of a crime. The FAIR Act directly addresses these injustices and is a critical step toward restoring fairness and accountability, protecting property owners’ rights, and curbing the weaponization of civil forfeiture laws once and for all,” Paul added to the statement.

If you are rooting for the Strategic Bitcoin Reserve, the passing of the FAIR Act should be a prerequisite for its establishment to ensure that the Government’s bitcoin stack is not built on the abuse of its powers.