What are the two things that gangsters and business owners have in common?
Fear of being caught by the IRS or police for doing something “wrong”.
“Big money loves silence,” as they say, and if you attract too much attention from authorities, then eventually it could affect your job. Just look at what happened to Al Capone and The Wolf of Wall Street.
But what about a whole industry, based on the technology that allows avoiding interaction with the traditional financial institutions - can it escape from Big Brother long hands? As recent events show – no. Of course, I’m talking about the crypto and increasing pressure from the SEC, IRS, and even Congress.
As the industry evolved, regulators started paying closer attention to digital assets. One key reason for this was the fact that they didn’t want to lose control over money flow. Secondly, they wanted to get their piece of the cake. At the end of the day, if the government wants something bad enough, there is no barrier; even the presumed anonymity will not help.
Many of you may have heard that a couple of weeks ago, a group of hackers locked up Colonial’s business computer networks by encrypting data on them and demanded millions of dollars in ransom to unlock the system. To recover control over the system and avoid things from getting even worse, the company reportedly paid hackers $5 million. Sounds like a perfect crime, but no.
On June 7, the Department of Justice said that a new task force had recovered approximately $2.3 million in cryptocurrency. FBI Deputy Director Paul Abbeyt explained that the FBI was able to not only identify the DarkSide hackers' crypto wallet but also reach access to the "private key," or password.
It is still unclear how the key was compromised. However, the fact remains:
“There is no place beyond the reach of the FBI to conceal illicit funds that will prevent us from imposing risk and consequences upon malicious cyber actors.”
The question then emerges, is it the end of the crypto industry we know? Well, let’s start by saying that that Bitcoin offers no privacy if an address is linked to a real-world identity. Former CIA chief Michael Morell even said that “‘is easier for law enforcement to trace illicit activity using Bitcoin than it is to trace cross-border illegal activity using traditional banking transactions, and far easier than cash transactions.’”
What about private currencies like Monero? Unfortunately, they are also no longer secure: last year, the blockchain security company CipherTrace announced a tracking method that can track transactions within the ecosystem. Guess who got an interest in CipherTrace technology? The US Department of Homeland Security (DHS).
Overall, there is no doubt that governments will continue to enforce regulation against the crypto industry at the same time empowering surveillance and tracking systems. As always, justification for increased control will protect ordinary citizens, companies, government agencies, hospitals, and school systems from malicious attacks. Howbeit, with time, once called “disruptive technology”, it will completely lose its libertarian roots that emerged in response to the 2008 financial crisis. In other words, it will become part of the system.