Last month, I warned that the Foreign Account Tax Compliance Act, an attempt by the U.S. to impose reporting burdens on other countries' banks, would produce blowback for domestic financial institutions. Credit unions, at least, are worried.

The powerful Credit Union National Association has thrown its support behind Senator Rand Paul's bill to repeal the anti-privacy provisions of this heavy-handed law. "We share your concern that FATCA, if left in place, will impose billions of dollars of compliance costs on U.S. credit unions and banks annually," Bill Cheney, CUNA's president and CEO, wrote to Sen. Paul on May 8. "We are also concerned that FATCA and FATCA-related intergovernmental agreements with foreign nations undermine the constitutional privacy rights of U.S. credit union members and bank customers."

Cheney went on to emphasize the fear of reciprocation by foreign governments for Washington's overreaching.

"CUNA is also concerned that the European Union is considering adopting a 'European FATCA' which would regulate U.S. credit unions and banks in the same manner that the United States' FATCA purports to regulate credit unions and banks in the European Union," he wrote. "Unless Congress repeals FATCA, we think that it is only a matter of time before the extraterritorial diktats of a European FATCA and other FATCA-inspired foreign laws become additional compliance burdens on U.S. financial institutions." As the largest credit union advocacy association in the United States, CUNA represents nearly 90% of America's 7,000 state and federally chartered credit unions and their 96 million members.

Sen. Paul has cited the destructive effects of the law and questioned its legitimacy as a tool to combat tax evasion, arguing that "FATCA has had the practical effect of forcing [foreign financial institutions] to relinquish any association with American customers, and to avoid direct investment in the United States. Perhaps even more troubling, the implementation of FATCA has allowed the Treasury Department to make independent decisions with respect to the sovereignty of foreign nations and the privacy of United States citizens."

CUNA's support for rolling back FATCA follows a move on March 27 by the World Council of Credit Unions, which represents member-owned cooperative nonprofit lenders in 100 countries. Michael S. Edwards, the council's vice president and chief counsel, called for full repeal of the law, similarly citing the boomeranging costs of FATCA from foreign institutions to domestic U.S. entities like credit unions.

By comparison, the credit unions' banking brethren have been subdued in their resistance to FATCA. Texas and Florida banks have sued to block a regulation requiring them to tell the IRS when they pay interest to nonresident aliens, and the American Bankers Association has urged the agency to spare certain products and balances from reporting requirements.

Aside from the credit unions, many in Washington are weighing in on the matter. In its 2014 budget, the administration buried a request for Congress to authorize the Treasury Department to issue unprecedented regulations requiring U.S. financial institutions to report information on nonresident accounts for the IRS to share with foreign governments. This plan may be dead on arrival.

According to the White House's "Analytical Perspectives to the Fiscal Year 2014 Budget," "the [budget] proposal would provide the Secretary of the Treasury with authority to prescribe regulations that would require reporting of information with respect to nonresident alien individuals, entities that are not U.S. persons, and certain U.S. entities held in substantial part by non-U.S. owners, including information regarding account balances and payments made with respect to accounts held by such persons and entities."

Without such authority, the Treasury Department will be unable to follow up on its promises that have been a part of the already-negotiated "intergovernmental agreements." The IGAs have been instrumental in persuading foreign governments to enforce FATCA on themselves in exchange for imposing FATCA-like mandates domestically in the United States. But the agreements are an unauthorized creation of the U.S. Treasury Department, according to McGill University law professor Allison Christians, author of a recent Tax Notes International article, "The Dubious Legal Pedigree of IGAs (and Why It Matters)."

James George Jatras of RepealFATCA.com calls Sen. Paul's bill "a major game-changer." He also predicts Congress will fail to legislate the necessary reciprocity authority to rescue the flawed statute. "With the wind in Washington now blowing against FATCA, foreign governments are on notice that Treasury's promises of 'reciprocity' are plain rubbish," according to Jatras.

Though Sen. Paul's bill aims to repeal only certain anti-privacy provisions of the FATCA legislation and a companion version is expected in the House, he has also been holding up Senate approval of all tax treaties since he was elected in 2010.

Jatras encourages all international firms to get involved, adding that "American and non-U.S. firms that stand to lose millions of dollars each complying with FATCA need to help push the repeal bill through. FATCA repeal needs to be part of any tax reform."

With a litany of bipartisan reasons to oppose FATCA, ranging from privacy and sovereignty to U.S. economic competitiveness, it is startling that the legislation has advanced as far as it has. The situation speaks volumes about the opaque process of continually "hiding" the specifics of putting laws into practice in other legislation, resulting in the nearly seven-year implementation timetable.

Jon Matonis is an e-money researcher and crypto economist focused on expanding the circulation of nonpolitical digital currencies. His career has included senior posts at Sumitomo Bank, Visa, VeriSign, and Hushmail. Currently, he serves on the board of the Bitcoin Foundation. Follow him on Twitter @jonmatonis.