- Like all new technologies, it’s only a matter of time before law enforcement reigns in any free-wheeling in the crypto space, says Coinbase’s intelligence director.
- The original crypto ethos of rebuilding finance will go out the window as buttoned-up institutions enter.
- That may be the price to pay to grow the sector.
Just as law enforcement is able to investigate your phone records, soon they’ll be digging into your crypto wallets.
“Protections around that technology increased, as well as law enforcement’s ability to detect and investigate mobile phone use to the point where today it’s a normal thing to investigate mobile phones,” Coinbase’s intelligence director Iggy Azad told DL News.
“The same thing will happen to cryptocurrency,” he added.
And that’s not such a bad thing, he says.
Azad — a former investigator in the UK Metropolitan Police’s cybercrime unit who manages Coinbase’s ties with international agencies — outlined the future of crypto as it gains ground among both mainstream retail investors and underground illicit networks.
With such widespread adoption comes more scrutiny.
“The adoption of it has changed the view of those working within crypto,” he told DL News. “At the beginning, it was all about railing against the financial system of the world: ‘We’re going to implement a brand new one.’”
The comments come as Coinbase, the largest crypto exchange in the US, locks horns with the US Security and Exchange Commission over what the agency calls illegal, unregistered operations.
As the case winds its way through the courts, the arrival of Bitcoin ETFs also puts closer scrutiny on formally regulating the crypto economy.
The United Nations, which last month issued a whopping 106-page report that indicated Tether – specifically on the Tron network – was the “preferred choice” for illicit groups involved in a $17 billion crime racket in Southeast Asia.
Tether, a stablecoin pegged to the price of the US dollar, is attractive because of its low cost, wide availability in Asia, and also its ease of use among those preferring to stay anonymous, he said. (Tether and Tron have hit back at the UN’s analysis.)
“Why wouldn’t criminals use something which is a fast and efficient means of transferring funds?” Azad told DL News about the use of new technologies in illicit circles.
Lack of volatility and the global power of the greenback are also key features that play into the token’s adoption.
Still, that could change.
Crypto under scrutiny
Like any emerging technology, regulators and law enforcement alike will take more time to reign in any illicit behaviour. Until they do, bad actors are free to roam.
During an event at the Royal United Services Institute in London last year, US Deputy Treasury Secretary Wally Adeymo said, “the thing that we know about terrorist groups and those who look to move money illicitly is that they’re going to use any new technology to try to do that.”
He added that cryptocurrencies do not make up “the vast majority of the ways these groups are funded.”
In 2001, for example, terrorist organisations shifted from traditional banking rails to services like Venmo and PayPal, said Adeymo.
Crypto is merely the next rung on that ladder.
But that doesn’t mean organisations – crypto or otherwise – are off the hook.
Good corporate citizens in the digital age
Large tech firms are no strangers to government intervention.
Azad pointed to Apple’s objections to authorities’ demands to unveil encrypted information as it balanced user privacy and complying with the law.
Tether and other crypto firms aren’t just tech companies, though.
“The difference between a tech firm — like Nokia, BlackBerry, Apple — and a financial institution, is there’s another layer of regulation that has to be laid on top,” said Azad. “That’s financial regulations; local, national, and, of course, transnational.”
At more than $96 billion in total circulation value and a reported backing in cash equivalents, Tether, for example, is now about as big as a regional bank in the US.
“Tether is backed by assets, as are many stablecoins,” he added. “They have to comply with these regulations to grow and expand to attract business.”
Larger institutions like BlackRock and Fidelity will only be comfortable continuing to grow the pie via enhanced compliance.
“Then, of course, there’s more investment in cryptocurrency as a whole.”
Liam Kelly is DL News’ Berlin correspondent. Contact him at email@example.com.