Consensus 2021: The Ongoing Fight for Privacy

A conversation with crypto lawyer Marta Belcher about how cryptocurrencies fit into the decades-long battle for online privacy and the coming attacks against it.

AccessTimeIconApr 21, 2021 at 2:10 p.m. UTC
Updated Sep 14, 2021 at 12:44 p.m. UTC

Privacy is a civil right worth the fight. It’s a right we’re in danger of losing – that we were always in danger of losing – as life continues to move online. Technology, we’ve found, can be a tool for freedom as well as repression, or at least cheaper and more precise forms of mass surveillance.

These are the battle lines the early cypherpunks, the progenitors of cryptocurrencies, drew. Back when crypto referred to cryptography, the art of secreting information, rather than cryptocurrency, these people dreamt up and developed ways to ensure a modicum of online privacy. 

Marta Belcher will explore "What Are You Worth? The Economics of Privacy" as part of the Explorations track at Consensus by CoinDesk, our virtual experience May 24-27. Register here.

“Privacy is necessary for an open society in the electronic age,” programmer Eric Hughes wrote in the “A Cypherpunk’s Manifesto.” The document was published during the height of the Crypto Wars, a period when the U.S. government attempted to stifle development of commercial encryption. 

For most of modern history, encryption was a military technology, a way for states to conceal their secrets during times of war and peace. Computers weakened the governmental monopoly on encryption and made it public. This is how the world got PGP, or pretty good privacy. And, ultimately, Bitcoin.

Today's Crypto Wars have new players on the battlefield: corporate power. The U.S. National Security Agency, FBI and Department of Homeland Security routinely demand “backdoors” into encrypted apps, but private companies made a business out of snooping.

We’re accustomed to speaking about web giants like Facebook and Google breaking consumer trust, but Marta Belcher, a lawyer with Protocol Labs and the Electronic Frontier Foundation, thinks financial surveillance is a bigger issue for the future. Most forms of money exist in private ledgers: credit cards, online payment processors and banks. 

Essentially, before crypto, every transaction that was not conducted with cash or barter was at the mercy of private money-transmitting businesses. They have a record of all transactions and the ability to determine who can transact with whom. 

“A cashless society is a surveillance society,” Belcher told CoinDesk.

This trend will only accelerate as the online economy grows. Central banks the world over are developing digital currencies that could one day largely replace physical cash. The growth of legacy finance-dependent fintechs and banks shows little sign of slowing. 

To some extent, crypto is the only exit. Owned by everyone, cryptocurrencies are the latest frontier in the fight for privacy.

“Cryptocurrency is important for civil liberties precisely because it imports the anonymity of cash into the online world. That is a feature, not a bug,” Belcher said. 

CoinDesk spoke with Belcher over email about this ongoing fight. She’s due to speak at Consensus 2021, in May, on the same subject.  

What's the issue in privacy today you are most worried about?

Financial surveillance. For some reason, we accept the financial surveillance of the traditional banking system as completely normal. We don’t question the idea that financial institutions turn over data about our transactions to governments by default. And now, governments are increasingly extending the financial surveillance of the traditional banking system to cryptocurrencies. I’m worried about what that means for our civil liberties. My view is that, in the U.S., this financial surveillance is unconstitutional


What's the biggest mistake or misconception that is made in the debates around online privacy?

The idea that anonymity is bad and that tools that enhance privacy enable crime. Privacy and anonymity are not bad or illegal; they are essential for civil liberties. And this is especially true for financial transactions.

I remember pictures from the Hong Kong protests showing long lines at subway stations as pro-democracy protesters waited to purchase tickets with cash so that their electronic purchases would not place them at the scene of the protest. For me, this underscores that a cashless society is a surveillance society, and shows the importance of anonymous transactions. Cryptocurrency is important for civil liberties precisely because it imports the anonymity of cash into the online world. That is a feature, not a bug. 

The refrain that cryptocurrency facilitates crime is wrong. This is exactly the line of reasoning we hear from critics of end-to-end encryption and Tor. But the fact that a technology could be used to violate the law does not mean that there is something wrong with that technology. Notably, criminals have long used cash to commit crimes, but we don’t call for a ban on cash as a result and we don’t blame Ford when one of its cars is used as a getaway vehicle in a bank robbery. That may sound like an outlandish hypothetical, but I’m reminded that in the 1980s studios actually tried to make VCRs illegal because they could be used for copyright infringement, and they almost succeeded. 

What do you think about recent crypto regulatory proposals like FinCEN’s crypto reporting requirements, the Department of Justice’s Crypto Enforcement Framework, and FATF’s crypto guidance?

I think these are a disaster for civil liberties. Unfortunately, the U.S. government has been increasingly pushing to extend the financial surveillance of the traditional banking system to cryptocurrency. For example, government agencies have been specifically targeting privacy coins, and have even made up an acronym – “AECs” or “anonymity-enhanced cryptocurrencies.” 

The U.S. Department of Justice wrote in its "Cryptocurrency Enforcement Framework" in October that use of privacy coins like zcash is “indicative of possible criminal conduct.” The DOJ also said that mixers and tumblers can be criminally liable for money laundering because they are designed to conceal or disguise information about financial transactions.

In addition, FinCEN’s proposal would require certain cryptocurrency businesses to collect information not only about their own customers, but also people whom their customers interact with, and to turn over some of that information to the government by default. And the Financial Action Task Force also has new draft guidance that would greatly expand the number and kind of intermediaries that would be required to collect transaction data for the purposes of turning that data over to the government.

In my view, everyone in the crypto space should be concerned about these proposals and the government expanding the reach of financial surveillance to crypto.

Is centralization a core issue in privacy? 

Absolutely. We experience so much of our daily lives through a handful of large corporations. And we have no choice but to trust those companies not to misuse troves of data about us – what we do online, whom we talk to, what we click on and what we say – to trust them to keep that data safe from attackers and to protect our civil liberties when responding to requests from governments. There are all sorts of proposals for addressing these concerns, many of which involve heavy regulation, but my view is that the answer is decentralizing the web.



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