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Tuesday, June 26, 2018

US Secret Service warns Congress about privacy coins - here's what you need to know...

Robert Novy, the Deputy Assistant Director of the Office of Investigations for the United States Secret Service gave prepared testimony to the United States House of Representatives Committee on Financial Services Subcommittee on Terrorism and Illicit Finance.

Those prepared statements, just posted to the US House Of Representatives website (link) show they are becoming increasingly concerned about the use of cryptocurrency in illicit acts, stating:

"In recent years, criminals have increasingly used digital currencies to facilitate illicit activities onthe Internet. Digital currencies provide an efficient means of transferring large values globally, for both legitimate and criminal purposes."

Novy then listed the following reasons why 'criminals prefer digital currencies' saying these ‘characteristics’ appeal to them:

1) Widespread adoption as a medium of exchange for intended criminal activities.
2) The greatest degree of anonymity.
3) Protection against theft, fraud, and lawful seizure.
4) Can be readily exchanged to and from their preferred currency.
5) The ability to quickly and confidently transfer value transnationally.

Up to this point there wasn't much we haven't heard before, same things we saw in news stories often back when the mainstream media was just learning about Bitcoin and couldn't write a report on it without mentioning the big 'Silk Road' bust - where the suspected owner of a large illegal online marketplace that used Bitcoin as it's currency was arrested.

The topic then switched to privacy coins specifically - something we haven't heard law enforcement weigh in on much before. That's when Novy took a more hardlined approach, saying:

"We should also consider additional legislative or regulatory actions to address potential challenges related to anonymity-enhanced cryptocurrencies, services intended to obscure transactions on blockchains (i.e. cryptocurrency tumblers or mixers) and cryptocurrency mining pools."

In my opinion - I've always found this an odd argument to make, because even with all this in mind - the most anonymous method of transferring funds has and always will be paper cash.  Even privacy coins leave behind a larger footprint than a person simply handing someone a suitcase full of cash and disappearing into the night.

Also, not every transaction someone wants to keep private is also illegal. Every day countless numbers people use cash when they're buying something that may simply be embarrassing to them - but legal nonetheless. 

Lastly - these days even credit card companies are providing a method for anonymous usage though pre-paid cards, which can be purchased in cash and readily available at gas stations and grocery stores.

It's important to remember these are simply some suggestions given to lawmakers, but this still presents possible future complications for those investing in coins like Monero or ZCash.

At least it wasn't all bad - to his credit, Assistant Director Novy does see the legitimate use cases and benefits to the public cryptocurrencies offer, adding:

"Digital currencies have the potential to support more efficient and transparent global commerce, and to enhance U.S. economic competitiveness."

Another interesting thing we learned in the testimony - since 2015 the Secret Service has sized $28 million in cryptocurrencies during criminal investigations, primarily Bitcoin.
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Author: Ross Davis
E-Mail: Ross@GlobalCryptoPress.com Twitter:@RossFM
San Francisco News Desk