Redefining the crypto narrative to ensure technology innovation

In the wake of the recently released Economic Report of the President, it has become more critical than ever to address misconceptions about cryptocurrencies. The report presents a negative perspective on digital assets, highlighting illicit financial risks and potential threats to consumers and the financial system, and suggests a shift in the Biden administration’s approach to the sector — from neutrality to a more adversarial stance. While it is critical for governments to recognize the potential risks and challenges inherent in any new technology, they must not overlook the myriad benefits and opportunities that cryptocurrencies offer in today’s rapidly evolving digital landscape.

Embracing the transformative power of new technologies paves the way for unprecedented progress and innovation. By recognizing the potential for positive change, we can foster a forward-thinking mindset that transcends barriers and encourages solutions. Such an approach invites us to shape a future where technology acts as a driving force for growth and prosperity.

Focusing solely on the potential misuse of new technology can lead to costly mistakes and hinder our ability to seize opportunities for advancement. Cryptocurrencies in particular have faced opposition and skepticism due to their occasional association with illegal activity. But according to Chainalysis in its 2023 Crypto Crime Report, the share of all cryptocurrency activity associated with illegal activity was a measly 0.24% of transactions in 2022. That’s right, less than a quarter of 1%.

The positive benefits of blockchain technology far outweigh its negative aspects, including the growing prevalence of nonprofit crypto-donations and humanitarian aid distribution. And privacy-focused cryptocurrency features, such as those used for shielded transactions, can actually reduce the risks associated with criminal activity by making it more difficult for bad actors to gain access to sensitive information.

Address privacy concerns and misconceptions

In terms of crypto-privacy technology, in particular, Shielded Transactions offers an end-to-end encrypted system. This ensures that only the sender and intended recipient(s) have access to transaction data, and no one else can read it, including hackers or unwelcome third parties. The encrypted data is not accessible on the blockchain, which provides a crucial layer of security. There is nothing inherently illegal about transactions that offer as little data as possible. On the contrary, it reduces the participants’ vulnerability to illegal actors.

That doesn’t even mention the business benefits of crypto privacy technologies. Businesses can conduct confidential transactions and protect sensitive information from competitors and malicious actors. Privacy-focused crypto protocols increasingly use advanced cryptography techniques, such as zero-knowledge proofs, to further protect sensitive information. Such techniques can make it impossible for illegal actors to capture and read the data, even if they were to gain access.

I have a special affinity for zero-knowledge technology, as I hold the position of Head of Global Regulatory Relations for Electric Coin Co. (inventor of Zcash, and one of several organizations supporting the protocol and Zcash user experience today). Nevertheless, developers focused on many other networks, including Ethereum, are working to implement the zero-knowledge technology developed by Electric Coin Co., and they can also further develop and benefit from their own applications of this technology.

In short, the positive benefits far outweigh any perceived negative aspects. This is the case with people who avoid stalkers and try to leave abusive relationships. The Pennsylvania Coalition Against Domestic Violence reported that 98% of domestic violence cases involve financial abuse, which can include monitoring bank and credit card transactions or restricting the victim’s access to money.

The role of cryptocurrency in financial inclusion and empowerment

Cryptocurrencies have the potential to increase financial inclusion by providing access to financial services for individuals who are otherwise excluded from the traditional financial system, such as people in remote or underserved regions who rely on remittances.

For another example, Cuban YouTuber Erich García Cruz told CoinDesk in 2021 that he relies on cryptocurrency payments for income because he does not have access to global payment rails.

Cryptocurrencies support impressively fast cross-border transactions, provide access to alternative financial services and increase financial independence by removing the many high fees, delays and barriers often associated with the traditional financial system.

Understand the wider context of technology abuse

Cybercrime and other illegal activities are not limited to cryptocurrencies, as evidenced by the widespread use of the internet and mobile phones for criminal purposes. Cars have also been used for illegal activities such as theft and drug trafficking.

Although cash has been used for money laundering and other illegal activities, it remains a widely accepted form of payment. The positive benefits of these technologies, such as revolutionizing communication, improving connectivity, improving mobility and offering convenient payment options, greatly outweigh any negative aspects.

The same applies to cryptocurrencies. While some individuals use cryptocurrencies for illegal activities, such as money laundering, drug trafficking, and cybercrime, the vast majority of use is for legitimate purposes (such as financial transactions, investments, and even fundraising for startups). Furthermore, traditional banking is often unavailable or too expensive for many people around the world, especially women and marginalized communities in developing countries.

The importance of privacy and security in the digital age

With the spread of digital technology and online activity, personal and financial data has become an increasingly valuable commodity that is often bought and sold. While this information can be used for positive purposes, it can also be misused. This raises privacy and security concerns, as individuals may not be fully aware of who is collecting their financial data and how it is being used, abused or even weaponized.

The case of Nebraska teenager Celeste Burgess, indicted in 2022 for having an abortion, highlights the potential dangers of failing to encrypt personal data. In this case, Facebook provided her private messages to the police, which ultimately led to her arrest. This incident illustrates how failure to encrypt private data can put someone’s freedom at risk, regardless of whether their actions are in line with the law or not.

Shielded digital asset transactions, which provide additional security and privacy by encrypting transaction data (including sender, receiver and transaction amount), offer an additional layer of security, ensuring that financial transaction data is kept secure and private. Similar to HTTPS, a protocol that encrypts and authenticates data transmitted over the internet to prevent unauthorized access, Shielded Transactions protect sensitive financial information from eavesdropping and weapons.

Finding a balance between regulation, privacy and innovation

As concerns about the privacy and security of financial transaction data continue to grow, Shielded Transactions allow individuals to conduct financial transactions without revealing their identity or sensitive financial information.

Even Microsoft, a traditional tech giant, has developed a new zero-knowledge secure framework to improve user privacy and security for digital credential systems within decentralized identity ecosystems. Since it is clear that there are a wide range of legitimate business use cases for this privacy technology, it is critical for lawmakers to implement technology-neutral laws. Fraud and theft are already illegal, regardless of whether the perpetrators use cash or crypto. The solution involves improving law enforcement strategies for a digitally advanced world, rather than banning or restricting the technology itself.

All things considered, the vast majority of blockchain technology uses are for legitimate purposes, and cryptocurrencies have the potential to offer many benefits, including increased financial accessibility. By focusing on the positive aspects of cryptocurrencies – and reframing the narrative by not judging a technology by its abuses – we can work to overcome the challenges and harness its full potential for the benefit of all.