When he addressed the Economic Club of Washington earlier this year, US Treasury Secretary Steve Mnuchen compared cryptocurrency to “Swiss numbered bank accounts.” Weeks later, thousands of miles away in India, the nation’s Finance Minister said his government would “take all measures to eliminate use of these crypto-assets in financing illegitimate activities or as part of the payment system.”
These are just two examples, but they speak volumes. Governments across the globe are greeting the rise of cryptocurrency with suspicion and cynicism at best and often with downright hostility.
A system based on transparency and anonymity
The 21st century is one in which it is almost impossible to fly under the radar. When it comes to preventing and solving crime, that’s one thing, but the line between public safety and civil liberty is a fine one. In his speech in Washington, Mnuchen came right out and said it – Bitcoin transactions are difficult to track and the government doesn’t like that. In India, we have already seen, through the disastrous demonetization strategy of 2016, that the government will take any measures it can to bring financial transactions into public view – even if it plunges the economy into chaos and costs lives.
Bitcoin and other cryptocurrencies are unique in that transactions are completely transparent. Thousands of people all over the world carefully watch the Bitcoin price every day, buying and selling as they see fit, just as others do with stocks and bonds. Every single one of those transactions is there for all to see. You would think governments would be welcoming the digital currencies with open arms.
The problem, from their perspective, is that they might be transparent, but they are also anonymous – or at least, pseudo anonymous. Anyone can set up a Bitcoin account, buy some bitcoins, sell them to someone else, and it is all done using coded wallets and transactions that are not directly linked to anyone’s name or Social Security record.
Crime doesn’t pay
Of course, if the authorities are desperate to follow the money, they can do so. The point is that it would mean subpoenaing the records of whatever agency sold the coins in the first place, and following the trail from there. It’s convoluted, but it’s not impossible, as Ross Ulbricht could attest from his prison cell. The fact that all the information is there and could be unraveled in the case of genuine need, for example in solving serious crime, also gives the lie to the notion that governments love to wheel out that cryptocurrency could somehow be used to fund terrorism.
When you look at the way crypto works, it is the worst tool in the world for carrying out illegal activity, as the record is there for all to see and can never be removed. What really upsets governments is that finding that information takes time and effort. When crypto is used by thousands of people on a day to day basis, therefore, they are effectively “lost in the crowd” and there is no way for authorities to monitor their every transaction. And that’s the real reason governments don’t like cryptocurrency.