Congress Should Take Action Against Privacy Coins: Secret Service Official

A top official in the US Secret Service has asked Congress to take action against privacy-centric cryptocurrencies like zcash and monero, which include features designed to help users make anonymous transactions.

In prepared testimony given on Wednesday before the House of Representatives Committee on Financial Services Subcommittee on Terrorism and Illicit Finance, Robert Novy -- deputy assistant director of the Secret Service’s office of investigations -- called on legislators to adopt measures which would curb the usage of so-called “privacy coins.”

“We should also consider additional legislative or regulatory actions to address potential challenges related to anonymity-enhanced cryptocurrencies, services intended to obscure transactions on blockchains (i.e. cryptocurrency tumblers or mixers) and cryptocurrency mining pools.”

Though Novy did not mention any of these coins by name, the most prominent privacy-centric cryptocurrencies are monero and zcash. Monero transactions obfuscate senders and receivers by default, while zcash users can take advantage of the protocol’s “shielded addresses” when they want to keep transactions private.

Contrary to popular belief, bitcoin and most other cryptocurrencies are pseudonymous, not anonymous, and powerful analytics tools exist which can trace blockchain data. However, bitcoin users can employ tools such as “tumblers” and “mixers” to make it more difficult to trace funds back to their source.

FSA
Japan's Financial Services Agency has pressured exchanges to delist privacy coins like zcash and monero.

Law enforcement officials and regulators around the world have frequently expressed concern over the prevalence of such privacy-preserving technologies, though supporters point out that they’re no more anonymous than physical cash.

As CCN reported, Japan’s Financial Service Agency (FSA) -- the government body that regulates cryptocurrency exchanges in the country -- has pressured trading platforms to delist privacy coins.

Notably, though, the New York Department of Financial Services (NYDFS), which oversees what is perhaps the strictest cryptocurrency regulatory framework in the US, recently approved cryptocurrency exchange Gemini’s request to list zcash on its platform.

Whether Congress does take action or not, Novy had strong words for criminals who would seek to fund their activities through the use of cryptocurrency (which actually happens far less than most people think).

“Those that seek to further their illicit activities through use of digital currencies should have no illusions that they are beyond the reach of the law,” he concluded. “As the investigative work of the Secret Service and our law enforcement partners continues to demonstrate, we are relentless in enforcing the law and will not be stopped by the perceived anonymity of the Internet or digital currencies.”

Images from Shutterstock

Last modified (UTC): June 22, 2018 5:35 PM

About the author

Josiah Wilmoth
Josiah Wilmoth

Josiah is the US Editor at CCN, where he focuses on financial markets and cryptocurrencies. He has written over 2,000 articles since joining CCN in 2014. His work has also been featured on ZeroHedge, Yahoo Finance, and Investing.com. He holds bitcoin, but does not engage in day trading. He lives in rural Virginia. Follow him on Twitter @y3llowb1ackbird or email him directly at josiah.wilmoth(at)ccn.com.