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Following the Crypto-Anarchist Dream: 3 Reasons to Reject KYC and AML

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Last year, crypto KYC and AML requirements came bursting onto the scene with thunderous applause and approbation. Many traders felt like the ICO sector was rife with scammers and con artists. In this sense, they believed there would be redemption through government. The scammers and hucksters would go to prison for defrauding investors and all would be well. After all, many people believed government regulations were necessary to curb people’s appetite for ethereum-based shitcoins. “All financial markets need regulations!” was their lodestone.

Also read: Chatter Report: Antonopoulos Criticizes KYC, Kasireddy Claims Decentralization Not Always Better

Letting Go of the Crypto-Anarchist Dream

The emergence of more government into the cryptocurrency space reflected a sentiment antithetical to the crypto-anarchist dream. This is the dream of being financially independent and removed from the state apparatus. Bitcoin emerged on the heels of the 2007 and 2008 financial collapse as a way to stop onerous regulations and crush the banking elite under the weight of financial sovereignty. And yet many players in the cryptocurrency ecosystem seem to have forgotten the purpose of Bitcoin’s evolution.

As a reminder, there are three powerful reasons why the cryptocurrency industry as a whole should reject KYC and AML regulations and the governments that issue them. These are the same reasons why the industry should not uphold the broken, parasitical system that has caused the suffering of millions.

Regulations Are Threats of Violence

Right out of the gate, a regulation is a de facto threat of violence. When a government issues any kind of regulation, they are effectively saying, “Do what we want or we will put you in jail or kill you.” A lot of people try to avoid or dance around this truth. They say regulations protect consumers, investors and businesses

However, these threats of violence do not protect anyone. KYC and AML regulations are the most obvious examples. When government forces people to comply with “know your customer” regulations, they force people to provide personal, sensitive information. They are likewise coercing financial institutions into demanding this information from their customers. It creates a predatory, unnatural environment.

In a free market, companies would not issue these threats or they would simply lose business. It’s economically insane. Government is thus an artificial player in the market that also harms people via its regulatory requirements. Governments create misaligned incentives. In this regard, regulations are a miasma pervading the financial life of humankind. What is worse is these coercive regulations also have serious collateral consequences.

Regulations Cause Financial Exclusion

The most talked about consequence of regulation is the financial exclusion it promotes. There are millions of unbanked people across the world. These people do not have access to financial institutions or a way to adopt electronic banking. This is primarily due to KYC and AML requirements. If people do not have the proper documentation and identifying materials, there is no way they can adopt modern financial services. This makes the industry a walled garden of fascist-like control that only accepts witting participants from first world countries.

The system effectively removes people living in sub-Saharan Africa, Venezuela, the Middle East, and other technologically bereft places from the equation. This is what happens when compliance trumps the need to modernize isolated locales across the globe. An article titled “There’s a Bigger Scam Than Anything in Crypto, It’s Called KYC/AML,” further explores this issue:

An entire country, Somalia, began to starve because U.K. banks decided it was not worth the bother to bank remittance services. Forty percent of the country’s population relied on these remittances – people sending their hard-earned savings home to feed their families. The U.K. banks’ excuse: payments to Somalia were “high-risk,” a euphemism for not worth the compliance cost of dealing with people with poor documentation. Invariably, those who pay the highest cost are society’s weakest.

Hackers Prey on Data Honeypots

KYC and AML regulations also bring out the hackers and opportunists. If government forces a company to adopt KYC, they naturally store customer data on a centralized server. This unwise play creates an attractive honey pot for thieves on the dark web. A Daily Hodl article elaborated:

“According to Reddit user Gamm86, a hacker can circumvent the 2FA by posing as a user who lost their 2FA access (which can happen to anyone who loses a phone). The crypto exchange will then ask for proof of identity from the user, which the hacker can access via the dark web. Once a hacker sends in the requested documents, the exchange either resets or removes the 2FA codes. The hacker can then gain access and effectively drain a crypto account.”

In the absence of KYC regulations, the industry would not have to worry about this kind of collateral damage. Unfortunately, this is what happens when people who do not understand the industry get involved with “regulating” it. They create scenarios that make market actors vulnerable to malevolent forces.

A Return to Crypto-Anarchy: Self-Governance

The crypto community should work to mitigate government regulation. It is factual and clear that government mandates are acts that harm individuals as well as whole communities. A regulation is just scribbling on a sheet of paper that doubles as a thinly-veiled threat of violence, causing a cascade of harm to befall the ecosystem.

The solution is to embrace a state of crypto-anarchism. This means all the iconoclasts, entrepreneurs, developers, and philosophers in the space should work to produce more freedom and educate neophytes about the purpose of the tech. There is a seductive element of government regulation mixed with ample pressure, but the reality is self-government — or free market solutions — is more effective. It reduces coercion and violence, and creates natural remedies to any seemingly intractable problem.

The last thing the ecosystem needs is for AML and KYC regulations to grow so unwieldy and confusing that it induces corporate fascism and regulatory capture through an extensive and confusing array of impossible rules no one can navigate. Crypto-anarchy is the only answer to the Gordian knot of statist politicking.

Do you support KYC and AML? Or are regulations naturally bad? What are market alternatives to government-mandated regulations?


Images courtesy of Shutterstock


OP-ed disclaimer: This is an Op-ed article. The opinions expressed in this article are the author’s own. Bitcoin.com does not endorse nor support views, opinions or conclusions drawn in this post. Bitcoin.com is not responsible for or liable for any content, accuracy or quality within the Op-ed article. Readers should do their own due diligence before taking any actions related to the content. Bitcoin.com is not responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any information in this Op-ed article.

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Wendy McElroy: Satoshi Revolution – Afterword

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The Satoshi Revolution: A Revolution of Rising Expectations.
Afterword
by Wendy McElroy

I meant to end this book by discussing the blockchain’s impact on physical violence, on crimes of violence. I can’t. I don’t think there is an impact. I don’t know how the blockchain can prevent back-alley rapes, for example. I could talk about putting sex work on an open ledger, but that would be weak tea, and it would feel like an evasion. This is a book of original theory, which explores what has never been said before about cryptocurrency. I don’t always know where the ideas are taking me. But the impact on physical violence isn’t one of those destinations.

And, so, I am writing the afterword to my book, instead.

My journey through cryptocurrency began in a kitchen in Chile. I was the featured speaker at a conference that also presented a panel of three experts on bitcoin. My husband and I decided to rent a house through airbnb because we wanted to extend the couple of days into two weeks of bouncing around the country, which was magical. The house we ended up with, however, was outfitted for weddings. Translation: there were no fewer than thirty beds crammed into about twenty rooms that were linked by floors that consisted of cracked plywood between which there was you and a two-story drop. It wasn’t a house; it was an adventure, with one working bathroom. I prefer to consider it “quaint.”

The conference housed the speakers and attendants on a remote compound, which quickly filled up. At some point, the organizers asked us to put up the bitcoin experts. We immediately and gladly agreed. They were pleasant, presentable fellows—albeit men who spoke of matters that made no sense whatsoever to me. Fortunately, my husband develops hardware and software for embedded systems, so I am used to not quite understanding things.

And, then, there was the morning after they arrived. One fellow slept in. One insisted on cooking breakfast; I do not mean to cast aspersions upon him, because he was wonderful and trying to be a good guest. But people do not cook around me. I cook; you eat; we get along fine. He cooked.

So I was in a cranky mood when I stared across the breakfast table into the coal-black eyes of Michael Goldstein, whom I later learned is the Satoshi Institute. A remarkable young man. Michael is nicknamed Bitstein by those who have affection for him…and, really, all you have to do is meet him for that to happen. When I looked into his eyes, I had an oh-so-familiar feeling because I do have mirrors in my bathroom. “This is a fanatic,” I concluded. I happen to like fanatics, depending on the topic under discussion, of course. I had nothing against the topic of bitcoin, which had started to interest me because so many people I liked took it so darned seriously.

With an unwavering stare, Bitstein told me the blockchain was an open ledger that delivered anarchy. Okay. I immediately understood the power of crypto to bypass the central banking system…if it was widely adopted; if it was not outlawed, if… But anarchy? All my reservations were political and entirely different than those of husband, who joined us after about fifteen minutes. Brad waited until Michael took a breath and, then, he said one word: “scalability.” It was the first time Michael stumbled. Michael said, “we’re working on that.” I saw Brad lose interest.

I didn’t. I didn’t know what scalability was, except in the definitional sense. But I didn’t care because the word “anarchy” had been uttered, and that I knew about. Michael seemed more than happy to leave behind scalability for politics, and I pursued why he thought the dawn of freedom had arrived like the cavalry on an algorithm.

Michael answered, and he did not convince me, but he did prompt me to read. As did my old friend Jeff Tucker. As did the incredible Stephan Kinsella. Other people tried to raise my awareness, as well. Mihai Alisie, of Bitcoin Magazine, asked me to write for him on anarchism, for example. I don’t think I adequately thanked the man for having such automatic confidence in me. And, at that point, his confidence was probably ill-founded. I submitted one article to Bitcoin Magazine, which was far from my best work. It drew a better response than I deserved: they were willing to “work with me.” I thanked the editor, and backed away with the absolutely genuine excuse that I did not know if I had anything original to contribute to the discussion. I had nothing new to say. I had not yet grasped the hard, cold edges of crypto theory, and I did not understand its power. Which meant I had not yet staked out the one area where I could and can contribute something original: the integration of crypto-anarchism with the rich history of anarchist-libertarian theory that has spanned centuries.

As I read further, I became ashamed of myself. Crypto-anarchism: the most important political development in my lifetime had occurred without my noticing it happening, which is inexcusable. I had spent my time on “official” libertarianism—donation-driven and donation-defined institutes, tax-funded universities, academic journals… When did freedom ever come packaged in tax dollars, awards, and honors delivered at rubber-chicken dinners? Freedom is a street fight. Crypto-anarchism took over the streets without my noticing. I notice now.

Enter Roger Ver. Our first contact was an email that he sent out of the blue. Roger’s email “had” me at hello, because he used the word “voluntaryism” while asking me to write for his site. In 1982, I was one of three people who created the modern Voluntaryist movement during a bull-session in a two-bedroom rent-controlled apartment in Hollywood, California. I remember my fingertips literally buzzing from the excitement of the ideas and plans we were forging back then: Carl Watner, George H. Smith, and me. But, mostly, Carl. It was and is almost unbelievable to me that, decades and decades later, a voluntaryist visionary named Roger would be knocking on my door (so to speak).

Roger had good timing. In science-fiction language, I had finally grokked bitcoin; I tip my hat to Robert A Heinlein for that word, BTW. I also tip my hat to Roger and the entire bitcoin.com crew for never– and I mean not once, in any manner whatsoever–trying to influence the ideas as I spun them out in my sometimes clumsy attempt to integrate crypto-anarchism into the broader traditions of classical liberalism, Austrian economics, and individualist anarchism. And, yes, a period of fierce editing will ensue. Clumsiness will be eradicated.

Before closing, I must address another aspect of crypto-anarchism. I did not expect this side benefit, but there you have it; life is often unexpected. Crypto has made me young again.

I’ve had the immense good fortune to befriend and to spend so many years with people who helped found the modern libertarian movement. Murray Rothbard used to joke at conferences in the 1980s that libertarianism could be eliminated by one well-placed bomb. He was correct.

There is a downside to my immense good fortune, however. The people with whom I grew into intellectual adulthood now make me feel old, mostly because so many of them are dead. Feeling old is feeling tired, with nothing in sight that makes your eyes sparkle.

I remember Murray, and his passion—I remember it so vividly. But, increasingly and over years, something went wrong with his passion. It came from anger, and it was expressed by attacking other people. I remember an after-conference dinner at which a diner had the incredible misfortune to say something positive about Keynes. And, then—God help us all!–he elaborated. Murray finally exploded into a rant in his Brooklyneque-squawk of a voice, and the fellow started to back down. I think he would have backed his chair out of the restaurant, if that had been a possibility. He conceded that Keynes may have been wrong on “this” issue, and on “that” one, and that Keynes was probably weak on historical context. Murray slammed his open hand down on the table and declared, “And Hiter was ‘weak’ on the Jews!” Everyone laughed, but it was an attack, nevertheless.

Crypto sparkles like a spinning thing in the sun, and the sparkle is clean, because it does not come from anger or from demeaning someone or something else. The passion is positive. A door has been flung open, and I don’t know where the path outside of it will lead me because I could never have predicted the path up to this point. Let it evolve.

One thing I know. I am in good company; the bitcoin.com crew has been nothing but decent and grinning toward this gal who plopped into their midst. That means the world to me. I don’t know where I will end up next, but I do know that technology—not merely crypto—is going to give us all a wild ride for the rest of our lives. I will have my hands on the keyboard, trying to put the dizzy changes into historical perspective, even as they happen.

I have a chance of doing so…because I am young again. I am hopeful. And nothing, nothing is impossible. That’s what this book has meant to me. I pause in this journey to thank you for being part of it.

Reprints of this article should credit bitcoin.com and include a link back to the original links to all previous chapters


Wendy McElroy has agreed to ”live-publish” her new book The Satoshi Revolution exclusively with Bitcoin.com. Every Saturday you’ll find another installment in a series of posts planned to conclude after about 18 months. Altogether they’ll make up her new book ”The Satoshi Revolution”. Read it here first.

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