E.J. Fagan of Business Insider penned an article in December on the perils of cryptocurrency anonymity. He rambled for several paragraphs about the horrors of hidden, peer-to-peer money transfers, and how they will cause massive oppression and spur unprecedented levels of money laundering. His article incited alarmist and propagandist paranoia because the understanding of cryptocurrency Fagan exhibited was insufficient for writing a coherent, rational critique. As a result, the author committed several errors.
Also Read: Bitcoin was Built to Incite Peaceful Anarchy
One area the author focused on was the prospect of money laundering, especially through the use of more anonymous cryptocurrencies like Zero Coin. He believes that if these more furtive means of using currency become widespread, money laundering and criminality will likewise increase.
“To summarize my argument: transnational crime is a global business valued in the hundreds of billions of dollars, and criminals need a way to easily launder, move, and invest that money to make it worth the risk. I brought up two examples-rhino poaching and human trafficking-in the op-ed, but there are dozens more crimes (including drug trafficking and weapons smuggling) to which you can refer.”
There is no doubt that criminals will use any valuable currency to conceal and eventually smuggle into legitimate financial sectors. However, the idea that cryptocurrencies may ease this process, even in the form of Zero Coin dark wallets, is a non-argument. There is little evidence to back the claim up, and the author offered none. Fagan’s position is hocus pocus.
Here is why: criminals already use cash with no paper trail. They move money around with mules and stow it away in various places with no hassle. Even If they had fewer options for hiding their stash, enterprising drug lords could bury it underground like Pablo Escobar did. These kingpins also have many ways maneuver their ill-gotten gains into the books of acceptable businesses. Furthermore, there are also banks and companies that have laundered millions, sometimes billions without ever touching cryptocurrency.
During the 2000’s, HSBC banks laundered millions for terrorist campaigns, drug traffickers, and all manner of other nefarious entities. Then there’s the Black Market Colombian Drug Peso Exchange, which is considered to be one of the largest money laundering operations in the western hemisphere. British multinational bank Standard Chartered was also estimated to have laundered billions of dollars to Iran for various purposes. The list goes on and on, and all these used fiat currency and central banking mechanisms—not cryptocurrency.
Of course, Mr. Fagan believes—without evidence—that things will get worse with cryptocurrency’s earmark anonymity. But the facts tell a different story. Dangerous criminals and kingpins will use whatever funds they can get their hands on, and they will make the system bend to their wills anyway. It is already extremely easy for these bad people to clean money, and cryptocurrencies are not making a dent in the laundering schemes already under way. But part of the idea of “money laundering” has come into existence as a result of immoral and dangerous laws, which Fagan never considers.
When government’s ban consensual activities like drugs, prostitution, and gambling, black markets spring up to provide these goods, and money laundering becomes the natural mechanism by which “criminals” protect their earnings. In the absence of silly laws, the vast amount of money laundering would vanish overnight. Furthermore, digital money will end nonsensical laws by undermining the government’s that generate them. It is true: cryptocurrency was created to promote financial freedom by stamping out government. But strangely, Fagan believes otherwise.
The Argument that Politicians will Use Crypto against the People
Fagan believes cryptocurrency will exacerbate government crimes instead of stopping them. He argues that cryptocurrencies will make governments more powerful and allow them to steal and launder more money. He sees cryptocurrencies as being a deadlier tool of control for the oppressors because they can use these cryptos to hurt people.
“The evidence is clear: the ability to conceal movements of money is not a tool of the little guy. Those nameless oppressive governments, that bitcoin proponents oppose, are filled with corrupt officials that absolutely adore financial opacity. Tunisia has been struggling to trace the £11bn hidden abroad by the Ben Ali regime for more than three years with little success. We may never find the majority of the Gaddafi regime’s hidden money, estimated to be as much as $80 billion. Contrary to what some Bitcoin supporters espouse, anonymous financial transactions are undeniably a tool of oppression. It should be no surprise that Russia and China, two of the biggest money laundering hubs in the world, are some of the fastest growing markets for Bitcoins.”
The evidence is far from clear. And the examples Fagan uses are examples of laundering that take advantage of paper currencies. He is simply fantasizing that cryptos will worsen the problem, which is erroneous. His cries that cryptocurrencies will inspire governments to cause more oppression are based two things: denial of how government’s commit financial crimes, and ignorance of cryptocurrency protocols.
Bitcoin is Not a Money Launderer’s Dream
First, Fagan ignores the current state of affairs. Governments are using centralization of financial control, lawmaking, and money printing to subjugate people. Fagan must realize that governments use money inflation mechanisms to silently extort the population, not to mention manipulate interest rates. These central bankers and government bureaucrats have so much power they could even type their own salaries into personal computers without batting an eye. The current system allows them to plunder everyone legally, yet Fagan indirectly argues for keeping the system’s heart thumping. So ironically, when Fagan argues against cryptocurrency, he argues against the only money that has the capability and features to stop oppressors and protect people.
Second, in a stroke of ignorance, Fagan believes cryptocurrency worsens the current situation. This is wrong on many levels. Cryptocurrencies were built to incite peaceful anarchy. The protocol was written in order to keep money away from centralized control and put it in the hands of the people. Arguably, even if politicians started using cryptocurrency to launder money; as soon as cryptocurrency goes public, the political elite would lose control of their financial monopoly, obliterating their power base.
Why would this happen? Because blockchain technology prohibits a tiny group of sociopaths from running the system and choosing how to divvy out and circulate funds. Cryptocurrencies allow the first and true democratization of money. They make sure that power elites cannot arbitrarily steal money wholesale by maintaining a grip on institutions that regulate money.
Third, a National Risk Assessment report published by the UK government in October 2015 placed Bitcoin at the very bottom on a list ranking the preferred methods used by criminals to launder money.
“The money laundering risk associated with digital currencies is low, though if the use of digital currencies were to become more prevalent in the UK this risk could rise,” reads an excerpt from the report, adding:
“Digital currencies are currently not a method by which terrorists raise or move money out of the UK (though they remain a viable method for doing so).”
Fagan’s arguments are basically red herrings that ignore the deeper implications of Bitcoin, Zero Coin, and all other altcoins by focusing on the possibility of money laundering by politicians. But the protocol totally undermines their ability to maintain ownership over the financial means of production.
Even though Fagan was wrong about many issues, at least he had the courage to challenge cypto-enthusiasts with an opportunity to offer counterarguments.
Fagan’s Challenge Accepted
This was his challenge:
“Does Zerocoin have any benefits that justify allowing these kinds of harms? I haven’t heard anyone make that case. So here’s the challenge to supporters of anonymous money transfer: Make an affirmative case for it. Give examples of where we’ll all be better off if people can make untraceable peer-to-peer money transfers. Tell us how you are going to be substantively less free in a world where financial paper trails exist.”
As I argued above, all cryptocurrencies were purposely built to eliminate the need for third parties. They are meant to stop the injustices perpetrated by bureaucratic and white collar criminals. All of the features of cryptocurrencies repudiate this fact. They are peer-to-peer, decentralized, uncontrolled by custodians, encrypted with public-key cryptography, and cannot be seized arbitrarily. They are the best possible monetary guardians of the little man.
With this knowledge of encryption protocols fully realized, it is easy to see why everyone will be better off with untraceable peer-to-peer money as opposed to the fiat system. People will not have to rely on governmental control of money; they can be their own bank, dodge taxation regiments, prevent authorities from seizing funds, equalize monetary transactions, and maintain total self-responsibility in financial matters. They can take back the power. They no longer have to kneel before the altar of the monetary elite.
I just hope that Fagan will take a second look at digital cryptocurrency, and try to understand it and evaluate the history of why it was created. Perhaps he will change his mind. Perhaps all naysayers will.
Images courtesy of Eatmoreheat.com, psychologyofgames.com, traxaarmstrong.com