The Department of Internal Security wants to untangle the privacy

The US Department of Homeland Security is trying to unveil the secrets of private currency transactions, but can regulators kill crypto-privacy?

While the cryptocurrency space continues to grow, global regulators are increasing their efforts to understand and monitor the increasing volume of financial exchanges facilitated by cryptocurrency technology. At the dawn of the cryptic revolution, Bitcoin was considered by many to be an untraceable method of exchange of value on the Internet, largely because the forces of order and government agencies did not understand the technology, and did not see the urgent need to devote resources to examining the crypto ecosystem. Since then, regulators have developed advanced methods to track Bitcoin transactions (and those of other cryptocurrencies) by examining the publicly visible registers inherent in the blockchain technology. The authorities claim to monitor these blockchains with the intention of supporting existing monetary policies, protecting investors and ensuring that crypto-users can not circumvent the rules concerning money laundering or the purchase of goods and services illegal.

Because of this greater level of control, crypto-users are now turning to private currencies, which are cryptocurrencies designed to be completely anonymous and untraceable, to protect their transaction histories from the indiscreet looks of government agencies and law enforcement agencies. # 39; order. In many cases, these users interested in privacy are not necessarily criminals trying to avoid tax obligations, buy illegal goods or recycle dirty money, but rather crypto-enthusiasts who consider transactions as untraceable as a fundamental milestone of the ideology of the cryptocurrency.

Regulators are well aware of this growing interest in private currencies and are now acting in an attempt to monitor even private-currency transactions. Until now, privacy currencies have continued to challenge regulatory efforts to track transactions on their networks, leaving legislators the choice to substantially increase their efforts.

The regulators are turning on the heat on the coins for privacy

Coins for privacy, such as Monero, Dash and Zcash, are now targeted by the US Department of Homeland Security (DoHS), according to a recent pre-solicitation paper published by the agency in late November. While the pre-solicitation document is only a precursor for the effective development of a regulatory platform, the document outlines a request that requires a platform that can forensically analyze the privacy coin blockchains.

A key feature behind these new blockchain platforms that is often emphasized is the ability to maintain anonymity and privacy protection. Although these characteristics are desirable, there is equally an interesting interest in tracing and understanding illegal blockchain transactions and actions. To this end, this proposal requires solutions that allow law enforcement investigations to perform forensic analyzes on blockchain transactions.

/ Document: DHS-FY19-SBIR-PreSolicitation, published by: Department of Homeland Security, the research program on innovation for small businesses

Presumably, the DoHS will soon accept and fund the proposals of those who want to try to build a forensic platform for private money.

At the beginning of the year, private currencies were put under scrutiny even when the Japanese financial services agency (FSA) repressed the encryption markets, prohibiting trade in any private currency on cryptographic exchanges Japanese. The Japanese FSA has recognized private currencies as a potential risk to investors, and in the wake of the infamous Coincheck – which has seen $ 500 million of stolen money from the Japanese stock exchange – the FSA has promised to mitigate potential risks to investors through and fast regulation. Because private currencies are almost impossible to track or monitor, the FSA's decision to ban them is not a surprise.

Have regulators ever solved the "threat" of private currencies?

It is clear that regulators are watching private currencies longer, but that does not mean that regulators will ever be able to control the technology. Private currencies are excellent for hiding data specifications stored in their blockchains, and thanks to healthy development communities, these projects constantly refine their core technologies. The upcoming DoHS solicitation will prove to be the biggest test that private currencies have ever faced, but there is no certainty that the blockchains of the best private currencies in the world can be deconstructed.

Also, banning privacy coins from cryptographic exchanges can make coins more difficult to obtain, but it will not erase them from existence. Instead, these bans will push the technology deeper into the margins of the financial world, where enterprising criminals, terrorists and money launders will likely still be able to get their hands on technology, effectively amplifying the nefarious usage regimes that regulators are looking to eliminate while simultaneously forcing the legitimate crypto-users to further develop ways to maintain their privacy.

There will always be a case of use for private currencies until cryptographic transactions will have value, many of these use cases are legitimately justified by our right to privacy as human beings. Because of this fact, it is very unlikely that we will see governments able to regulate private currencies, provided that the concepts of freedom and property rights exist both in the crypto-community and in society as a whole. Governments could increase the pressure exerted on privacy-focused projects, leading to short-term drops in use, but ultimately the crypto-community will have the final say if privacy coins will continue to serve an essential purpose. Indeed, it is possible that more pressure exerted on crypto-ecosystems by heavy regulators, the greater will be demand for private currencies, hoping that regulators will lead to thoughtful and inclusive measures for private currencies and the broader crypto market. .