In this edition of Max’s Corner, Max addresses the recent regulatory changes that have been shaking things up across the industry.
During the Libra hearings in Congress and the US Senate last month one thing that was often brought up by crypto skeptical lawmakers was the use of cryptocurrency to facilitate illicit activity. The argument goes that there is no reason for a law-abiding citizen to use cryptocurrency. Law abiding citizens have nothing to hide so anyone seeking to protect themselves or their financial information must have an ulterior, sinister motive for doing so.
“We’re told by some that innovation is always good. The most innovative thing that happened this century was when Bin Laden came up with the innovative idea of flying two airplanes into towers. That’s the most consequential innovation, although this may do more to endanger America than even that,” said Sherman at the hearings.
As over-the-top as Sherman’s comments might seem, he is not the only one that has been sounding the alarm bells recently. From the moment people started paying more attention to cryptocurrency, it has been portrayed in traditional media outlets as being fundamentally connected with nefarious actors.
This association is most likely due to people’s first impressions of the technology—many first became aware of Bitcoin because of its use on the dark web—lingering in the popular consciousness. Outside of that, there is more incentive for the media to talk about any criminal connection that cryptocurrency may have than there is to talk about the latest technological developments in the industry or the upsides it offers people. Cryptography doesn’t get clicks, not like crime does.
How warranted is the rhetoric?
I think you would be hard-pressed to find anyone outside of Brad Sherman’s circle of orbit that thinks cryptocurrency is a national security threat to the United States on the same scale as 9/11. On its face, that is an absurd statement. America has many security issues, as do all modern nation-states, but cryptocurrency doesn’t really qualify as one of them.
Sherman and like-minded people in America, perhaps more than they see cryptocurrency as a security threat due to its use by criminals, see cryptocurrency as a threat to the global hegemony of the US dollar. It is telling that Sherman’s comments were directed specifically at Libra, which, with access to Facebook’s 2 billion plus users, would actually be able to challenge the dollar on some fronts.
Also, it’s Libra. Facebook’s coin. Facebook has more data on all of its users than it knows what to do with. This week, in what amounts to just the latest in a long line of privacy infractions that no one in power seems to want to do anything about, Bloomberg revealed that Facebook had been hiring people to listen to and transcribe audio files it had recorded of people using its products.
Just for reference, this revelation comes a year after Mark Zuckerberg denied that Facebook listened in on its users in Congressional testimony. “You’re talking about this conspiracy theory that gets passed around that we listen to what’s going on on your microphone and use that for ads,” Zuckerberg told Congress last April. “We don’t do that.”
With all the information Facebook has on its users, the idea that Libra is going to become a key tool for criminals looking to hide their financial tracks is a bit absurd. There are, however, cryptocurrencies that exist in more than just the name. And it is precisely because of how intrusive companies like Facebook and their ilk have become that real cryptocurrencies and companies that are willing to protect user privacy are needed.
Anti-Money Laundering Measures
One specific criminal act that has been tied to cryptocurrency is money laundering, and regulators around the world have taken steps this summer to crack down on individuals using crypto to launder ill-gotten funds.
Even though many exchanges have introduced strict KYC and AML policies to placate regulators, it hasn’t been enough according to the Financial Action Task Force, an international organization that works to combat money laundering and terrorist financing. In June of this year, FATF published what has been called a nonbinding “Guidance” document detailing what lawmakers in its member states should do to minimize the amount of illegal financial transactions occurring on crypto exchanges.
The guidance seeks to establish the digital equivalent of the US banking law often referred to as the “travel rule.” The travel rule stipulates that when a customer transmits $3,000 or more from one institution to another, the institution where the money is moving from must provide the receiving institution with detailed personal information pertaining to the transmitter.
In crypto, the threshold will actually be lower, at the equivalent of $1,000. Also, the notion that the Guidance is nonbinding is somewhat specious as all countries that are part of FATF — including all G7 countries — plan on adhering to the recommendations in the document.
While combating money laundering efforts and terrorist financing are perfectly reasonable objectives to have, this is about more than that. Money laundering and terrorism existed long before cryptocurrency and it has long been time for people to stop associating privacy with criminality. How many more whistleblowers and tell-alls need to come out before people start coming to terms with reality? Privacy should be a right, and blockchain technology can help us fight back against the organizations and corporations that are trying to completely strip it from us.
At Bytecoin, our work is centered around a drive to restore financial balance. Key to restoring that balance is using the tools that are available to us to protect our assets and our information.
Exchanges are more often than not willing to institute stricter regulations because it is currently in their financial interest to do so. With more financial regulation comes more corporate interest in the space, which in turn leads to higher revenue. But if it were just about revenue, none of this would exist.
Cryptocurrency was developed to provide people with an alternative to traditional finance. Every step made to accommodate the wishes of regulators — as noble-minded as the regulators might sound — makes cryptocurrency that much more a part of the old system from which we wanted to extricate ourselves.