15 May 2020
As the issue of the privacy of cryptocurrency transactions grows larger, the cryptocurrency tracing companies have an even greater role in helping the crypto-world become more secure, more legitimate, and as such, more widespread, while the privacy of individuals is still being preserved.
Various Twitter and Reddit posts suggested that human rights on privacy are being violated by crypto-tracing companies. Nothing could be further from the truth. Crypto-tracing does not discover identities of individual users or expose their transactions, as the public blockchains contain all transactions which anyone in the world could see.
Crypto-tracing companies mostly identify the Virtual Asset Service Providers (VASPs) that are conducting cryptocurrency businesses as commercial companies, as well as discover criminal wallets and addresses connected to cryptocurrency theft, ransomware, extortion, fraud and many other criminal activity. Keeping things transparent and visible is supposed to stop criminal enterprises from acquiring law-abiding people's funds in the form of cryptocurrency by informing the public. In addition, the ability for administration of the law or authority is made possible through legal trials, subpoenas and court orders.
Having a cryptocurrency transaction system that is private, like the cash system, might prove to be indispensable for a functional democratic society. Of course, the practicalities, regulations and, ultimately, laws should ensure that users, which include businesses, government agencies, as well as ordinary consumers, have the ability to know where the funds are going when criminal or terrorist funding is suspected.
Large transfers of wealth between countries privately is not considered a fundamental human right. It has been against the law for 50 years in many countries and it was not written into any constitution. The origin of many today's sophisticated money laundering schemes can be found in the events following World War II, when fascist governments and criminals were trying to hide the stolen funds of millions of people by moving those funds across the borders, funds from devastated or outright murdered families, many of which were very wealthy beore the war.
Does anyone remember the 99' CypherPunk movement? This movement advocated use of strong cryptography and privacy-enhancing technologies as society and politics changed, deeming privacy a necessity if a society seeks to remain open in this digital age. The question was how to ensure anonymity in a digital cash system with a global reach.
Cryptocurrency scams are happening more often now than ever before, and not only to private individuals, sometimes it's businesses operating in the cryptocurrency market that about to go bankrupt from losing millions, even tens of millions of dollars, threatening to financially damage or even destroy thousands of customers. For such purposes, these incidents should be investigated and the victims of these crimes should have a chance for legal due process in order to try recovering their stolen funds.
With that in mind, privacy can and should be guaranteed in payments between two persons, but when criminal acts are involved, and even more by companies, blockchain tracing of those companies, as well as the victims, is of utmost importance for keeping the sprawling crypto-ecosystem secure and trustworthy.