Governments Keep an Eye on Crypto as a ‘Growing Threat’: Edward Snowden

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Governments Keep an Eye on Crypto as a ‘Growing Threat’: Edward Snowden

NewsGovernments Keep an Eye on Crypto as a ‘Growing Threat': Edward Snowden

Edward Snowden warned at Camp Ethereal 2022 that global governments are concerned about the crypto’s potential to upend the regulatory status quo.

Cryptocurrencies are seen as a potential threat by governments, according to whistleblower Edward Snowden. He made this statement in an interview with Marta Belcher, president of Filecoin Foundation and general counsel at Protocol Labs, at Camp Ethereal 2022 last week.

“I think governments correctly perceive an evolving threat to traditional tools which they’ve grown accustomed to,” Snowden said, “in terms of an ability to impose regulation upon private lives, and more broadly, private trade.”

The US financial system, which is invasive in nature

He also took aim at the “extremely invasive” financial system in the United States.

“When you think about the way the U.S. incredibly invasive financial network operates, with all of these anti-money laundering and know-your-customer impositions,” he said, “it is hard for me to believe that if they had the technical capacity to very easily get the serial number of every dollar bill that passes through their hands, that they do not.”

For the government whistleblower, these characteristics mean that it is not easy to keep their identity secret.

“We have this presupposition that cash is anonymous, that we have inherited from a time when it meaningfully was. That is no longer true. When you think about Bitcoin having a public ledger, well, once a dollar enters the banking system, there is a private ledger that is available to the people who are performing financial surveillance. So it’s really just private to the public, but it’s public to the prominent, shall we say.”

Enter crypto.

Surveillance of cryptocurrencies and financial transactions

Many of the same concerns that Snowden has about the traditional financial system apply to Bitcoin.

Last year’s Ethereal Summit witnessed Snowden declare that Bitcoin must adapt in order to counteract law enforcement efforts to regulate other cryptocurrencies, such as Monero.

At the Ethereal Summit this year, he stated that Ethereum “has the same kinds of privacy issues as Bitcoin,” adding that with the Bitcoin blockchain, “you have people who are chain analyzing and whatnot who are doing fairly devious things with it” in an effort to obtain a financial advantage.

He still thinks the Bitcoin blockchain is an “even playing field,” but he acknowledged that none of his privacy concerns have prevented him from seeing the potential of cryptocurrencies and decentralized technology.

“What people are really missing as they get down in the weeds is how transformative the power relationships are, or how much the power relationships are going to transform, as we move from these legacy technologies to these sort of future decentralized technologies,” he said.

Some people say that the government sees the crypto industry as a threat. They might be right, because the government has been sending many signals that suggest this is true.

The United States, crypto, and national security

The United States has warned people about the dangers of using cryptocurrencies. They say that it could be a threat to national security. Last summer, the Biden administration set up a task force to fight ransomware attacks and find out who is paying for them with cryptocurrencies.

More recently, former FBI agent and current Director of Threat Intelligence at Abnormal Security Crane Hassold told Decrypt that cryptocurrencies have been the “main driving force” behind today’s ransomware industry.

President Biden warned Russia to stop the ransomware activity happening in their country. However, Russia did not listen. In fact, according to recent data, Russian-backed criminals made about 74% of the world’s ransomware profits in 2021.

Some of the profits were generated in Moscow. A skyscraper there called Vostok was used to help business with crypto hackers, cybercriminals, and money launderers.

Last year, in October, the US Treasury published a report that said cryptocurrencies could undermine economic sanctions. Economic sanctions have been an important part of American foreign policy for a long time. The report said that cryptocurrencies offer bad actors opportunities to hold and transfer money outside of the traditional financial system. They also give our enemies opportunities to build new financial systems

This issue has become more important since Russia invaded Ukraine. Many experts say that Russia would not be able to easily use crypto to avoid sanctions using this method.

Snowden did not comment explicitly about Ukraine, but his observations about governments and crypto are relevant to this topic.

Russia, Ukraine, and sanctions

The Biden administration is concerned that people might use cryptocurrencies to get around economic sanctions. This could threaten national security. This is something that Edward Snowden has talked about.

The Treasury’s Office of Foreign Assets Control announced new rules on March 1st to restrict financial transactions related to Russia. The new rules, called the Russian Harmful Foreign Activities Sanctions Regulations, are designed to prevent people from circumventing any existing United States sanctions. This could include using digital currencies or assets, or physical assets.

Some people in the crypto industry do not think that cryptocurrencies are good ways to avoid sanctions. Jake Chervinsky is one of these people. He is the head of policy for the Blockchain Association.

However, some precedent does exist. David Carlisle, director of policy and regulatory affairs at blockchain analytics firm Elliptic, recently pointed to non-compliant exchanges being used by Russia-affiliated cybercriminals.

“We’ve seen instances before of crypto asset exchange services that were complicit in enabling Russia-based criminals to launder large amounts of money,” He said during a recent online webinar that SUEX is an example.

The Treasury’s Office of Foreign Assets Control sanctioned SUEX in September. This was done because they were involved in cyber-attacks against the US.

In terms of how national governments can “do the right thing,” Snowden highlighted recent actions by Canadian authorities to prohibit protestors from accessing their bank accounts as an alarming example of overreach.

“Somebody should be able to send something to anyone for anything,” Snowden said. “And that shouldn’t be something that we can interfere with, that shouldn’t be something the government of Canada, or whatever, can say, ‘We’re gonna cut this off.’ Because if we do that, everybody’s going to start doing it—and that’s not supposition, we already see it happening. The idea that Canada of all places would do this—and I think most people see Canada as a pretty enlightened government—is really an illustration of the concern. Whether you’re for or against this particular protest or protest movement is really secondary to the problem that, at the flip of a switch, we are vulnerable to being unable to take anything out of our wallet.”