About cryptocurrency tracing companies and data protection on the blockchain
I would like to address the privacy issue of cryptocurrency transactions and the role of cryptocurrency tracing companies in helping make the cryptocurrency world safer, more diffused, and more legitimate while preserving individual privacy.
Opinions have been voiced on Twitter and Reddit that cryptocurrency tracking companies are violating human rights related to privacy. This is nonsense. CipherTrace does not identify individual users, nor do we know their identity or disclose their transactions. Remember, all transactions on public blockchains are available to the world.
CipherTrace has always been an advocate for user privacy. We do not and cannot identify the individual identity of cryptocurrency users. However, we identify the Virtual Asset Service Providers (VASPs), which are commercial companies that conduct cryptocurrency businesses. We also strive to identify criminal addresses and wallets related to cryptocurrency theft, widespread consumer fraud, ransomware, extortion, child exploitation and other crimes against people around the world. This transparency helps people send their cryptocurrency funds to criminal companies. It also provides an opportunity for legal process through court orders, subpoenas, and legal proceedings to recover potentially stolen funds for victims.
At CipherTrace, we believe that a private, cash-like transaction environment for cryptocurrencies is vital to the functioning of democratic societies. However, there are laws, regulations, and practicalities that must enable consumers, businesses, and government agencies to determine where funds are being sent if they are of criminal or terrorist origin.
There is no basic human right to be able to transfer large assets anonymously between countries. It is not enshrined in any constitution and has been illegal in many countries for 50 years. Recall the post World War II era when criminals and fascist governments moved the stolen funds from millions of people and tried to hide those funds from families who were devastated or murdered. This has evolved into sophisticated money laundering systems that continue to this day.
Before I co-founded CipherTrace, I was involved in the CypherPunk movement in 1999. This movement focused on how privacy is necessary for an open society in the electronic age. We had dinner at a Chinese restaurant in Palo Alto, California every first Tuesday of the month trying to figure out how to build a global digital cash system with anonymity features. I attended the financial cryptography conference on the island of Anguilla in 2000, where I met with Zero Knowledge Systems (the precursor to the zero knowledge evidence used in Zcash), E-gold (before they were charged with money laundering), Mondex , Digicash and others. I met with the inventors of smart contracts years before Ethereum was developed. I was addicted to cryptocurrencies long before Bitcoin was invented – and I understood the importance of privacy.
Every day, CipherTrace receives urgent requests for help from people whose cryptocurrencies have been stolen or lost through fraud. Sometimes these are cryptocurrency companies that have lost tens of millions of dollars or more and are on the verge of bankruptcy and wrecking the finances of thousands of customers. Don’t they have the right to have these incidents investigated and to reclaim their funds through due process? These are people who are losing all of their savings, education, and investments.
CipherTrace believes that person-to-person payments can and should remain private. But when there are companies involved that either facilitate crime or are victims themselves, blockchain tracing of these companies is a crucial skill to keep the cryptocurrency secure and viable for future growth.
May 11, 2020