Secret Service Warns that Anonymous Cryptos Must be Addressed
A leading Secret Service official has recently warned the United States Congress that desperate and immediate action must be taken to prevent select cryptocurrencies from aiding in deeply illegal activities. Specifically, the official lamented the use of digital currencies focused primarily on providing full privacy to its users, such as Monero and Zcash. These currencies were initially created in order to address key privacy concerns on the blockchain of more popular currencies.
The Secret Service’s Office of Investigations has always been primarily involved in financial crimes, as their original purpose in creation was to prevent counterfeiting. Consequently, it only makes sense that the organization would place a spotlight on the cryptocurrencies that provide ample security in anonymity to their users. These currencies are used in the trade of counterfeit money on massive exchanges on the dark net markets.
Robert Novy is the deputy assistant director within the U.S. Secret Service Office for Investigations. In a report to Congress, he remarked that the legislative body should “consider additional … actions to address potential challenges” relating to “anonymity-enhanced cryptocurrencies.” Additionally, he outlined the need for a greater regulation of some blockchain-based tools, such as tumblers and mixers, that are specifically used to try to anonymize transactions.
He wasn’t alone in his interest in further exploring legislative solutions to the problems native to the blockchain’s newest anonymous patrons. Greg Nevano of the Immigration and Customs Enforcement (ICE) department reiterated his concerns, finding that tracking newer cryptocurrencies is made increasingly difficult, especially with the plethora of new features and tools designed to mask the nature of user transactions.
Novy stressed that lawmakers should allocate additional powers to agencies such as his own in order to take action against, and override the powers of, organizations or businesses that are working to obstruct existing investigations concerning customer data and financial information.
The arguments were heard during an official hearing regarding virtual currencies. The hearing was held by a sub-committee of the House Financial Services committee. While the crypto community has maximized its application in the financial sector in the past three years, this event shows that the government has not forgotten the deeply-seeded criminality which underscores many cryptocurrencies and their applications.
Policymakers outlined that the use of cryptos for illicit purposes continues to be “one of the greatest emerging threats” to United States security in the coming years. This sentiment comes from Representative Robert Pittenger, a representative from the state of North Carolina.
The enforcement division of FinCEN was also present within the meeting. The organization’s associate director, Thomas Ott, outlined that billions of dollars in “suspicious activity” have come from virtual currencies which focus on anonymity and privacy of owners.
Persisting Global Issues
The issues of crypto are not limited to the United States. Ott referenced the prominence of regulatory efforts in other countries, saying that we have seen “great strides” to address “the regulatory gap” within countries like “Australia, Japan, and South Korea.”
Moving forward, reflective regulation might require the United States to survey other countries of the world, taking pages from their book in order to develop a comprehensive way to regulate that balances government interest in regulation with the industry’s need for innovative freedom.