Supreme Court Grants Authorities Access to Crypto Wallets

Viewpoint by: Vikrant Sharma, CEO of Cake Labs

When the United States Supreme Court declined to review Harper v. Faulkender on June 30, 2025, the court fundamentally supported the Internal Revenue Service’s extensive “John Doe” subpoenas for cryptocurrency records.

By allowing a lower court’s decision to remain, the court validated that the long-standing third-party doctrine applies to public ledgers in the same way it does for banking documents. According to the third-party doctrine, information willingly shared with another entity, like a bank or blockchain, loses protection under the Fourth Amendment. Once data is no longer under an individual’s immediate control, constitutional privacy safeguards diminish.

For on-chain transactions, whether permanently inscribed into any blockchain network, nearly every payment is now subject to warrantless investigation. Prosecutors, tax officials, and, therefore, any opponent with the time to sift through public data can now browse anyone’s financial details at their convenience.

Analytics entrepreneurs exploit “radical transparency”

No organization has profited more swiftly than blockchain forensic companies. The global analytics sector is expected to reach $41 billion this year, nearly double the figure from 2024. Their clustering algorithms already identify over 60% of unlawful stablecoin transfers, which — at face value — is an impressive statistic, yet it also indicates the dwindling nature of pseudonymity.

The proposition to regulators is compelling: “Compensate us, and every wallet transforms into a transparent bank.”

However, this same dragnet indiscriminately absorbs innocent data into vast spreadsheets overflowing with payroll, health care, and political contributions data.

This data is continually susceptible to breaches or subpoenas. Congress is unlikely to intervene. Only cryptographic advancements can seal this gap until lawmakers reimagine privacy for the digital age.

Certain Bitcoin privacy techniques allow you to publish a fixed receiving address while generating unique, unlinkable on-chain outputs that thwart prevalent analytical patterns.

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

Other strategies coordinate inputs from several parties in a manner that obscures the typical “sender vs. change” patterns that analysts seek.

Since these methods avoid custodial mixing pools, implementing sanctions imposed on Tornado Cash in 2022 is less straightforward.

If wallets and payment platforms provided such protections by default, rather than as optional features, basic privacy could become more accessible as encrypted web connections gradually became standard.

Neglect privacy, face market repercussions

Investors typically overlook the warning signs until it’s too late, and disregarding protocol-level privacy will yield severe consequences. Emarketer anticipates consumer payment adoption to leap 82% from 2024 to 2026, but the neglected detail in that analysis is that only 2.6% of Americans are projected to pay with cryptocurrency by 2026.

Widespread adoption remains hostage to perceptions of security and confidentiality, and if coffee shop staff can connect tips to home addresses, mainstream wallets will stagnate. While that reality sends shivers down consumers’ spines, institutional investors view the compliance obstacles with concern.