Blockchain Caucus Co-Chair Says Crypto 'Backdoor' Is Key to Unmasking Bad Actors: Report

U.S. Rep. Bill Foster (D-Ill.), who also co-chairs the Congressional Blockchain Caucus, believes a trusted third party, such as the courts, should have access to a crypto backdoor.

In an interview with Axios on Tuesday, the congressman said that until the industry could grapple with crypto-ransomware attacks, total anonymity would be "very hard to sustain."

Foster said new legislation and rules could establish a type of pseudo-anonymity where only judicial powers would have access to certain information. The congressman suggested allowing the court to use its access to a "very heavily guarded key," a "cryptographic backdoor in essence," allowing it to reverse transactions on the blockchain.

"You (authorities) have to be able to go to court to unmask participants under some circumstances," said Foster. "It does not have to be visible to the whole world."

The congressman also drew a distinction between digital and physical assets in the context of ransomware attacks, providing an example of unmarked dollar bills being put in a trash can versus total anonymity afforded to hackers.

Asked whether the Federal Bureau of Investigation's retrieval of bitcoin from the Colonial Pipeline ransomware attackers last month afforded a solution to the problem, the congressman said recouping funds would eventually become "more difficult."

The fundamental decision one has to make when it comes to crypto is between retaining true anonymity versus being able to unmask participants and reverse fraudulent or mistaken transactions, the congressman noted.

"There's not a technological alternative that I am aware of," said Foster. "I think for most people, if they are going to have a big part of their net worth tied up in crypto assets they're going to want to have that security blanket of a trusted third party."