A Canada-based cryptocurrency exchange wants to coordinate with other startups around the world to help fight the international fentanyl epidemic.
Einstein, based in Vancouver, is trying to obtain lists of wallet addresses associated with fentanyl arrests and indictments, said Christine Duhaime, the firm’s chief anti-money-laundering officer.
In parallel, the firm is also pursuing partnerships with other exchanges, starting in its home country and in the U.S., “to build a global database of bad wallet holders,” said Duhaime, who also runs an eponymous law firm and is the founder of the Digital Finance Institute, a think tank.
The goal is for Einstein and other exchanges to prevent their customers from sending cryptocurrency to these wallets from their exchange accounts, Duhaime told a suit-and-tied crowd of 200 at the Blockchain for Business and Government conference in Toronto, Monday.
While cryptocurrency ranks at the bottom among ways fentanyl is paid for – bank wires and traditional money transmitters are more commonly used – Duhaime framed Einstein’s efforts to combat the drug as philanthropic.
She told attendees:
“We would do a blacklist of wallets as our giveback [to society].”
Still, there’s good reason for a Canadian exchange, one of the few serving the market actively, to seek to break ground on such an effort.
Fentanyl is a synthetic drug that’s 50 times stronger than heroin and was responsible for a reported 66 percent of overdose-related deaths in the U.S. in 2016. But Vancouver is the “ground zero” of the problem, Duhaime said, with fentanyl accounting for nearly all the Canadian city’s 922 drug overdose deaths that year.
She related a story of the teenage daughter of the head of AML compliance at a global bank who died from taking fentanyl at a graduation party. Even first responders have died from accidentally touching the stuff.
If successful, Einstein’s effort could conceivably help the cryptocurrency space overcome its lingering public image as a hive of criminality. However, the strategy may not sit well with long-time crypto users who value their privacy highly and worry about the effect blacklists have on the fungibility of bitcoin and other tokens.
A more immediate obstacle, Duhaime told CoinDesk, is that law enforcement in Canada has been reluctant to provide Einstein with wallet addresses tied to fentanyl cases, out of concern that doing so would violate privacy laws.
In response, she said, she has argued that not even bank account numbers are considered identifying information under Canadian law, and noted that wallet addresses are public. The agencies are reconsidering, she said.
Einstein already has a blacklist of addresses associated with ransomware, but it was able to put that one together on its own. That’s because ransomware victims who were Einstein customers came to the company with the information, Duhaime said.
The fentanyl effort, by contrast, will require law enforcement’s help.
While acknowledging that criminals have ways to hide their tracks on the blockchain, she told CoinDesk that fentanyl users are likely “not as sophisticated” as other bad actors and less apt to change wallets or tumble their coins.
In an earlier presentation at the conference, Michael Gokturk, Einstein’s CEO, acknowledged the irony of trying to position his company as a model of compliance in a market whose very creation was an act of rebellion.
“Cryptocurrencies need government regulation to deter price manipulation and related wrongs, but the absence of of such regulation is one of the biggest reasons that investors buy into cryptocurrencies in the first place.”
Possibly compounding the challenge, Einstein, founded about a year ago, is currently a pipsqueak among exchanges, which might limit its clout in persuading potential partners to join the effort.
Gokturk said Einstein is currently handling $20 million to $30 million in daily volume (in USD), which would put it at the low end of the top 50 tracked by CoinMarketCap.
By comparison, Coinbase’s GDAX, which ranks 12th, does about $240 million daily.
Disclosure: CoinDesk is a subsidiary of Digital Currency Group, which has an ownership stake in Coinbase.
Opioids image via Shutterstock
Disclosure Read More
The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.