About Privacy and Regulations


In April 2018 the G20 will meet and discuss regulation of cryptocurrencies.

Among several measures, they’ll probably force Exchanges to share clients data, just like the Korean government did recently.

More generally, there will be a regulatory push to reduce anonymity and privacy in the crypto environment, and increase obligations of information sharing.

I’ve read on Trustnodes that Ethereum was planning to increase privacy during the year 2018.

In my opinion it would be safer to delay this implementation until the crypto regulatory framework is well known.

A privacy option facilitates illegal activities, and several “privacy” cryptocurrencies are already monitored by authorities.

For example, an interesting article : “Bitcoin is being dropped by criminals in favour of privacy coins like monero” : https://www.independent.co.uk/news/business/analysis-and-features/bitcoin-latest-updates-price-privacy-coins-cryptocurrency-monero-digital-currency-price-a8137901.html

People responsible for “privacy coins” may face lawsuits in the future.

So it would be safer to keep a fully public, transparent and traceable Ethereum ledger. It enables Ethereum to stay neutral and not facilitate any hidden activities.

The traceability of transactions is also increasing responsibility and accountability of users, so it’s pretty positive in my opinion. It also increases the quality and reputability of the investment.

Regarding Plasma chains and other implementations, It would be careful to make sure transactions are also fully traceable.

There is no doubt some users will create ERC tokens some authorities will want to monitor.

It is true that Ethereum Foundation is in Switzerland, which is a country very favorable to privacy, but this is not an absolute protection. For example, Credit Suisse and UBS had to pay large penalties in 2014 despite they are located in Switzerland :

I think there’s a high likelihood of G20 finmin/central bank Meeting In Buenos Aires in March announcing some kind of global cooperation on identity in crypto currency transactions. France, Germany and others putting on agenda. Exchanges are obvious first targets, but not complete in coverage. From there I would expect bifurcation of chains into what I call white blockchains and black blockchains. White blockchains would offer regulatory compliance as a feature starting with identity but then extending into tax and other areas. I see the development of white blockchains as necessary for this ecosystem to flourish. But I also think we need to work to redefine what needs to occur to prove compliance with Govt regs rather than being takers of methods of past. Proving compliance without giving up privacy is very important if we want to avoid the surveillance state. Can we create a set of provable compliance protocols- ones that also protect privacy? It seems the tech pieces are starting to become available. I’m interested in joining with like minds to create the components necessary and engage in govt advocacy around this idea. What do you think?

I think the current level of privacy, with the pair of public and private key, is already high.

In my opinion it is safer to wait for the regulatory framework before changing anything about privacy. And plasma chains should be transparent and traceable too.

You’re right, there may be forks in order to ensure a better compliance with coming regulations.

Concerning Ethereum, there are already a lot of challenges concerning scalability and the transition from POW to POS. In my opinion, efforts should be focused on these subjects rather than taking any risk about privacy enhancement.

I understand your focus on tech but there is no waiting for regulatory frameworks as they already exist and apply to money movement, income tax and transaction tax, for example. Do not think that just because you are using “a new tech” that you are immune to the regs regarding selling something or holding/moving money. Enforcement is the issue and that’s something on the major government execs minds as I speak with them all around the world (tax specifically but AML always come up). And don’t think you can rely on small govs/tax havens as they are being put out of business rapidly with intl reform. WTO carries a big stick. Let me know if I’m coming off as Henny Penny to you as I feel like Paul Revere - the regulators are coming, the regulators are coming!

If these people create privacy coins, isnt it logical to assume they will be able to stay private ?))) Or these G-20 guys are going to send subpoenas to SHA-256 hashes?

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Dark chains will exist and will be targeted by Fincen and counterparts in many countries including 5 eyes countries. Methods are physical, spoofing as well as technical. My argument is that white chains will embrace the option to offer full compliance as a value added service. Most companies will chose them to derisk the biz models as investors will favor. Dark chains will be much as dark web of today. CoinDesk daily today covers much of this today - just coincidence.

The entire purpose of blockchain movement is to kill and destroy all financial institutions around the world, not to help them in any way. These guys are totally useless and can be effectively replaced by mathematical algorithms!

There are no white chains :slight_smile: How can you get compliant to something you want dead ?)

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A new form of distributed financial institution is arising based upon a new digital asset class. Citizen choice is enabling these digital assets to rise in value. It will be interesting to see how citizens react when their government issues a digital fiat and touts its benefits while attacking private cryptos. But I digress. I respect and understand your position. I simply differ in thinking that govts will find a way to trace and identify money flows - which I don’t think is a bad thing. What I’d like to do is ensure some degree of privacy is integrated, a negotiated settlement of how it’s going to work if you will. I’m not of the mind that a position of catch me if you can is sustainable or good for the industry.

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I think governments take a position that anonymous value transfers contribute to terrorism drug trafficking etc. This is totally wrong, value transfers have little to do with crime. If governments really wanted to destroy drug trafficking, they could destroy drug plantations in Columbia from drones, they see these things with millimeter precision. There are zillions of ways crime can be prosecuted in the modern world with all of the drones, AI algorithms, and video cameras. Stopping crime is trivial within the limits of Constitution and without violating any personal freedoms. In fact, you could let go 90% of all cops in the US and replace them all with an AI system, which would be 1000 times more effective and would stay strictly within the limits of constitution and human rights.

Ethereum is the base layer, the fondation is making code not operating the networks as it is decentralized.
On the contrary I think there is a more than ever need for privacy features as the governments aren trying to turn blockchain into a network with KYC everywhere which would lead to even less privacy as the banking system.
As buisness operator, I have to follow KYC laws (mostly to avoid ending up in jail) even if I think they are dangerous. But as a dev and a user I can dev and use privacy preserving features.

Someone should start develloping a privacy-warped ETH z-cash like. I guess it can be crowdfunded and I would personally contribute.