While it might vary according to the sources that you google, there are around four hundred million crypto users worldwide – that is a huge increase on the five million in 2016. Reasons to invest and use the digital currency are varied, some believe its value will stay with inflation, others appreciate the minimal extra […]
While it might vary according to the sources that you google, there are around four hundred million crypto users worldwide – that is a huge increase on the five million in 2016.
Reasons to invest and use the digital currency are varied, some believe its value will stay with inflation, others appreciate the minimal extra cost when transferring money abroad. The fact that it’s decentralised also offers privacy, control, and security compared to fiat money.
While fiat (cash) transactions are shared with the bank, which is often backed by a recognised government entity, cryptocurrencies are less traceable and not as easily accessed by third parties.
The reason for this is to secure an individual’s transactions and ensure autonomy over their finances.
Businesses using these services benefit by keeping their transactions confidential, shielding the details from competitors, and assuring consumers that their transactions are protected from any leaks or breaches.
As Peter Wood, chief technical officer at Web3 recruitment agency, Spectrum Search explains: “Privacy in cryptocurrencies is fundamentally about protecting individual autonomy and security a private sphere of economic activity from unwarranted observation and interference.”
Wood believes that the privacy crypto offers is crucial – not just for personal privacy but also as a defense against potential governmental overreach and financial surveillance, particularly in regions where personal assets are at risk from arbitrary governmental actions.
This may be a reason cybercurrencies remain banned in countries including China, Qatar, and Saudi Arabia. Russia is making efforts to ban cryptocurrencies, too.
Controversially, the US Department of Justice (DOJ) recently arrested and charged two founders of Bitcoin privacy wallet Samouri Wallet with conspiracy to money laundering and conspiracy to operate an unlicensed money service business.
Private wallets hold cryptocurrencies and are solely accessible to those who have the digital ‘key.’
Here, presents the issue. While Samouri Wallet aimed to keep its users completely anonymous in the name of financial privacy, the US DOJ claimed its level of concealment allowed unlawful activity to run on its platform.
The arrest went down negatively with crypto enthusiasts, with the argument that the government is forbidding the right to privacy.
At the time, high profile whistleblower Edward Snowden chimed in by posting on X: “The Department of “Justice” has once again criminalised the developers of an app that restores financial privacy.
“The way to fix this [is] to make money private by default. Privacy must never be ‘exceptional,’ or they will make it criminal.”
Fintech-loving criminals
We see cryptocurrencies mentioned regularly in relation to unlawful transactions. Ransomware gangs, for instance, will almost certainly demand funds to be transferred via cryptocurrency to avoid traceability, and those trading illicit goods and services will predominantly use it for money laundering purposes, too.
According to Chainalysis, an estimated $24.4 billion was received by illicit addresses in 2023.
“Cryptocurrencies certainly make it easier for cybercriminals to receive their cyber attack ransoms and are able to launder the ransoms with less chance of being monitored and caught along the way,” says Chris Hauk, consumer privacy advocate at Pixel Privacy.
Using cryptocurrency to move money allows criminals to bypass sanctions put in place through traditional financial systems like banks and makes the transaction much more difficult for the police to track.
Ransomware gangs, for instance, will often ask for money to be transferred via Bitcoin, and although this is known to be easily visible now, it can be moved instantly to a few private wallets without little approval.
There are efforts to tackle this by governments. Most major exchanges within cryptocurrency require proof of identity now, thanks to “Know-Your-Customer” measures the US’s Internal Revenue Service (IRS) and the EU are introducing.
This has helped enforcement step up on bad actors using the cyber currency, including a child exploitation ring, seizing a good portion of $4.5 billion in Bitcoin stolen in 2016.
But, Paul Bischoff, consumer privacy advocate at cyber security firm Comparitech states that it will be impossible to completely criminalise cryptocurrencies since they are decentralised, often open source, and easy to create for those with the skills.
Plus, it only tackles criminals within their countries. It remains difficult for government agencies to disrupt those outside.
Maintaining privacy
For context, while criminal activity runs through crypto platforms, it only made up 0.34% of crypto transactions last year according to Chainanalysis.
Surveys reveal that over a third of users use private wallets, and a tenth hold theirs offline in a hardware wallet, proving privacy is something normal users still care for.
“While it’s tough to track cryptocurrency payments, the government could introduce legislation to monitor and manage cryptocurrencies,” says Hauk.
However, the balance between maintaining privacy for the normal citizen, and monitoring cybercrime and fraud is a tricky one to get right, according to Wood.
“These regulations necessitate a delicate balance for providers, as they must align their operations with privacy assurances while adhering to regulatory frameworks designed to prevent illicit financial activities,” he says.
Wood calls for innovative solutions that reconcile privacy with transparency, pushing the boundaries of what can be achieved within the confines of the law.
Hauk adds: “My only concern about the government getting involved is that they’ll likely find ways to use any new laws to monitor the average citizen, who may simply be dipping their toe into the cryptocurrency pool.”
“The history of any cyber-related legislation we’ve seen in the past 30 years has simply led to increased surveillance on the average citizen,” he adds.
However, he also points out that money moving around in crypto won’t get very far in the real world: “Eventually, cryptocurrency must be converted to fiat currency, which are the transactions we should be monitoring most closely.”
Ben Stickland, member at cyber security firm CovertSwarm adds that at least many UK banks now have policies in place that prevent the purchase of cryptocurrencies or have higher levels of security before allowing those transactions to take place.
According to Wood, there are still many cyber-enabled crimes which rely on traditional methods such as moving money via gift cards and stolen banking information.
“It is critical to understand that these technologies themselves are not inherently geared towards facilitating criminal activities any more than traditional financial systems,” says Wood.
“This requires a collaborative effort among all stakeholders in the cryptocurrency ecosystem to develop balanced solutions that safeguard privacy while preventing abuse,” he concludes.
