Despite Europol’s statement that anonymous currencies are hardly used by terrorists, the European Commission will propose stricter rules on encryption and payment privacy in a bid to curb the financing of terrorism.
Why are government officials afraid of Bitcoin?
Government officials explain that “there seems to be a risk that virtual currencies may be used by terrorist organizations to conceal financial transactions, as these can be carried out more anonymously.” By being able to track financial flows, authorities hope to cut off terrorists’ access to funds and thus prevent attacks such as those in Paris and Brussels.
Valdis Dombrovskis, European Commission vice president, says:
“We want to improve the oversight of the many financial means used by terrorists, from cash and cultural artefacts to virtual currencies and anonymous pre-paid cards, while avoiding unnecessary obstacles to the functioning of payments and financial markets for ordinary, law-abiding citizens.”
Is Bitcoin an efficient tool for terrorists?
There are a number of reasons why terrorists might consider Bitcoin for a money laundering application. Firstly, you can instantly send Bitcoins anywhere in the world, almost for free, and without any intermediaries to freeze the funds. Besides, there is no identity attached to any Bitcoin transaction.
However, Jonathan Chester, Forbes expert on the bitcoin and blockchain industry, considers Bitcoin an ineffective method for financing terrorism and provides the following arguments to support his view:
- Bitcoin transaction by itself, without the use of additional technology, does not fully hide a user’s identity. Every transaction and every chain of transactions can be traced.
- In order to exchange Bitcoins for local currency, a terrorist would either have to create a bitcoin-based goods and services market or to exchange the bitcoins for currencies in markets like the United States, Europe, or China.
- This weakest part of the bitcoin chain from an anti-money laundering perspective is the liquidation link. But there is already strong regulation implemented to address identity issues around these weak links such as the Payment Services Directive administered by the European Commission.
Oil and guns are more likely to enable terrorism than bitcoins
Ghost Security Group, a collective of computer “hacktivists,” says it has located several bitcoin accounts that ISIS uses to fund operations. One account has received the equivalent of about $3 million USD in Bitcoin donations since 2012. Chester remarks that this may seem like a lot at first, but on the other hand, while Bitcoin has led to $3 million in illiquid assets over three years for so-called Islamic State, oil revenue amounts to about $100 million in liquid value a month.
Apart from oil revenue, guns are another means that enables terrorism to a great extent. As Dominic Vogel says to Cointelegraph, “Guns enable terrorists too and we have yet to see the FBI or other law enforcement agencies crack down on guns.”
Dominic Vogel, Chief Security Officer for Netcoins, explains:
“It's very myopic framing that focuses only on one threat, namely domestic terrorists. This obscures the fact that encryption provides security against a much broader spectrum of threats and not just terrorists. It is the easy way out for the FBI and law enforcement to say that “encryption enables terrorism.”
Society will not be able to function without encryption
According to Vogel, the global economy is incredibly reliant on encryption. Online banking and online shopping require encryption. Without it they would collapse as they would no longer be trustworthy. We use strong encryption every day and our Internet-connected world would be a far riskier place if we didn’t use it.
Encryption protects critical infrastructure, communications networks, the power grid, and water utilities. As we move to the Internet of Things with cars, thermostats and medical devices, all of which can destroy life and property if not properly encrypted, “society will not be able to function without encryption”, concludes Vogel.
Governments and private corporations already tracking our every move
The Paris and Brussels attacks created an atmosphere in which the European Commission must be seen to be doing what it can. Fortune’s David Meyer calls this situation “the fallout for virtual currencies”. The new legislation “would force virtual currency platforms to apply more due diligence controls when customers are exchanging virtual for real currencies, by bringing them under the scope of EU anti-money-laundering laws.” Basically, it means no Bitcoin payment privacy in existence from June 2017.
The Founder and CEO of dFused, Stephen Corliss, believes that privacy has become a myth already as “both governments and private corporations spend every second of every day tracking our every move.”
Stephen Corliss says to Cointelegraph:
“How can we scream foul about governments while at the same time tens of thousands of companies across the globe are benefiting handsomely from buying, selling, tracking, storing and building personal private data warehouses to maximize corporate revenue and profits at the expense of an unsuspecting society? Are we to assume these characters are more trustworthy than governments? Does capitalism really justify the same invasion of privacy? Personally, I cannot reconcile this position as the results involving corporate use of personal information are equally damaging.”
Could it be just another way to invade privacy under the veil of protection?
Corliss points out that “as long as we continue to allow personal information to not be controlled entirely by individuals at all times, this debate will continue while society suffers at the hands of war mongering politicians and greedy corporations.” He sees encryption as a right.
Stephen Corliss explains to Cointelegraph:
“For those who fear encryption enables terrorists, I wouldn’t worry as I’m quite sure governments will find other methods to monitor our actions. With this being said, it is my position that privacy absolutely outweighs safety but not as we are currently defining privacy. We must think more broadly if we are to have a more informed conversation about all the privacy issues caused by both public and private enterprises. Let’s not be naive and just focus on the invasion of privacy by governmental bodies under the veil of protection. Is the world a scary place? Yes, but what is equally scary to me is the damage caused by a global economy that is almost entirely dependent on consumption where corporations are allowed to prey on society with very intrusive customer, marketing and advertising strategies.”