Crypto’s surveillance problem, explained

  (photo credit: INGIMAGE)
(photo credit: INGIMAGE)

The crypto market has been active for over a decade now. $2 trillion in market cap has shown that the space is much more than just some fad that caught on with people on the internet. If anything, it has become evident that the crypto space is here to stay and we’re probably all going to have to engage with digital assets at some point.

However, there’s a lot that the prices of cryptocurrencies might not necessarily tell you. Investing in Bitcoin and other digital assets as a means of making money is fine, but those who believe in the functionality of cryptocurrencies might not necessarily be happy with the way things are right now.

Compromising To Please Regulators

When crypto first became mainstream, the goal was to grow and become something that everyone would use. It quickly became obvious that crypto adoption won’t happen until regulators follow these crypto purists and integrate digital assets into the global economy.

Up until now, many countries still don’t have regulatory structures in place for integrating cryptocurrencies. However, progress has been made nonetheless. Anyone can invest in crypto if they like, and as long as they understand the market’s risk, they will be able to achieve their goals.

Interestingly, for crypto to get here, some concessions needed to be made. One of those concessions had to do with confidentiality.

Exchanges Bowing To Pressure

When you try to buy or invest in crypto, you probably go to an exchange or a broker to help you out. These are essentially platforms that facilitate crypto trades and help anyone to onboard easily. But, for an exchange to operate in most countries, it will need to abide by the rules of the country’s financial regulators. These days, regulators require oversight of transactions to ensure that no criminal activities are taking space. And, this means that the exchanges will need to keep an eye on what you do.

This issue has been a thorn in the side of many crypto purists, who bemoan the current state of the market because it seems like everyone has sold out to please regulators. An exchange now requires that you take anti-money laundering (AML) and know-your-customer (KYC) checks before you can access its services. In essence, you’re giving them access to you and granting them permission to trace your transactions if they believe that you might be tied to some criminal enterprise or the other.

To be fair, it’s understandable that these platforms might want to know who you are before onboarding you. Besides the fact that they have no choice, they need these checks to curb criminal activity and be in line with the law. But, there’s a conversation to be had about the extent of this.

When crypto was first created, it quickly caught on because of what it represented - a way for people to send money anonymously over the internet without having to deal with any interference.

Today, more exchanges are taking these data checks seriously, and there’s the risk of limiting control.

What To Do?

The solutions to this problem are pretty complex. Regulators have made it clear that there will be no crypto legalization if they can’t get a peek into how transactions are being conducted. At the same time, crypto purists believe that the level of oversight into the market itself is already too extensive.

For now, the solution appears to be to run towards anonymity coins like Monero and ZCash if you really need anonymity. Assets like Bitcoin are becoming increasingly easy to track, and those who need anonymity might have to find a new way.

Now, this isn’t to say that there’s something wrong with crypto or the blockchain. As the underpinning technology for crypto, the blockchain remains committed to the mission of confidentiality and censorship resistance. We’ve seen this with the Super Protocol - a blockchain-based platform that offers decentralized cloud computing.

The Super Protocol combines confidential computing technology with blockchain, creating an environment where people can work and collaborate without having to compromise their sensitive data. Platforms like these show that the blockchain remains committed to the mission of bolstering user anonymity.

However, for traditional cryptocurrencies themselves, we in the market might have to come to terms with the fact that we might have to relinquish a little level of breach.

It definitely helps if you have nothing to hide in the first place. You can invest in crypto and earn money without having to worry about anyone spying on you. But, if you need to send money anonymously for any reason, perhaps focus on anonymity coins or use a cryptocurrency tumbler.


This article was written in cooperation with Tanvir Zafar