Durov’s defenders argued, among other things, that The secrecy of the platform guarantees, for example, freedom of expression for citizens living under authoritarian regimes. of various kinds, without addressing the criminal implications of protecting that unqualified anonymity.
This debate takes on a deeper and more complex dimension than those of a few decades ago due to the Advent of powerful new Information and Communications technologies (ICTs) that combine advances in artificial intelligence (AI), automation, the Internet of Things, Big Data, cloud computing and robotics.
ICTs and privacy
The dizzying technological changes we face They continue to radically transform our cultural, labor, social and political patterns; mutating the way in which we relate to each other as citizens, companies and the state..
In this digital universe democratic systems have been permeated from various perspectives by new actors, both large transnational technology companies, bigtechs, and platforms and networks that make anonymity an immutable religion.
On the one hand, some of these technologies have enabled the possibility for these bigtechs make huge monetary profits by capturing personal data en masseundermining the right to privacy.
On the other hand, some social media, messaging or digital asset holding and transfer platforms have tried to anonymize its participants, facilitating criminal activities of all kinds.
However, despite their differences, both types of platforms or networks are used to manipulate information of all kinds, allowing hate messages and fake news to spread.
In this context, one of the most innovative ICTs emerges, the decentralized networks (also called WEB3)created primarily based on distributed ledger technologies such as the blockchain.
Blockchain and pseudo-anonymity
Blockchain has now become a technology that cuts across all types of social and economic activities. Supply chains, the universe of decentralized finance (DeFi), medical records, voting systems, productive projects and many other developments are proof of this.
But originally the idea that the developers of bitcoin proposed hiding behind the pseudonym of “Satoshi Nakamoto” in 2008, was to create a technology that would enable a decentralized payment system based on cryptography, with a pseudo-anonymous character.
The character of pseudo anonymous refers to the fact that in some of these networks everyone Account movements are observable, but the final identity of the user is not known.
Contrary to popular belief, lPublic blockchains, like Bitcoin, are completely transparent networks. in terms of ensuring the immutability and visibility of the transaction history of each account created on its blockchain.
In this sense, in the original Blockchain (for example, in Bitcoin) The only data that is recorded for each user is a cryptographic key (combination of letters and numbers) protecting the final identity of the participants.
However, if someone obtains information that allows them to link a blockchain address to an entity or person, they can monitor that user’s entire transaction history.
Exchanges and anti-money laundering regulations
In general, Crypto users usually make their first cryptocurrency purchase through an Exchange, at which time they are asked to identify themselves. in compliance with the requirements established by the agencies dedicated to the prevention of money laundering in each jurisdiction.
If the Exchange completes the purchase of the amount of cryptocurrencies requested by the client with its own key, the transaction will be recorded in the Blockchain in the name of the exchange.
If the user, be it a client or an exchange, uses several different addresses, any link between these addresses may expose the fact that they belong to the same user.
These considerations take on special relevance in Argentina’s current situation, in which the National Securities Commission opened the PSAV registry (Virtual Asset Service Providers), which already has 70 legal entities and 7 natural persons registered, while, according to newspaper reports, the BCRA is analyzing the possibility of repealing the provision that prevents to banking institutions and payment service providers offering payment accounts (PSPCP) trading crypto-assets.
Mixers or the search for privacy without mitigating factors
Although original blockchain networks like Bitcoin keep the identity of their participants secret, Developers emerged who decided to go a step further in protecting anonymity of its users seeking to break the traceability that public blockchains have creating platforms called mixers.
Simply put, the mixers They work in a similar way to a “double window” system, one for entry and one for exit.. At one window, the user makes numerous low-denomination deposits for which he is issued “digital certificates of deposit” that he will use, after a while, to go to the other window and withdraw those deposits into an account other than the one used to make the deposit. Between these two steps, two factors operate that will allow the transaction to become anonymous. The first is the large number of input and output operations that The mixer is responsible for “mixing” (hence its name) and thus creating a “confusion” that does not allow relating input accounts with output accounts.
The other factor is the use of ZKP technology – zero-knowledge proofs, which is used to generate these “certificates of deposit”. ZKPs allow certain information to be confirmed (the source account) without revealing that information.
This latest technology (ZKP) is the one that is leading the transformation that the DeFi universe is experiencing, in this case, not because of the possibility of generating anonymity, but because of its ability to validate large amounts of block transactions, increasing the performance of the Blockchain. An example of how this technology can be used both virtuously to optimize the network, or maliciously to support illegitimate operations.
Tornado Cash and the difficulties of judging decentralized smart contracts
Perhaps the most famous mixer sea Tornado Cash, a crypto platform with decentralized governance made up of a set of smart contracts that aims to facilitate anonymity in transactions that are processed on public blockchains.
On August 8, 2022, The Office of Foreign Assets Control (OFAC) of the United States Department of the Treasury sanctioned Tornado Cashfor carrying out money laundering operations carried out since its creation in 2019 for an amount greater than 7 billion dollars. This sanction prohibited US citizens from interacting with the platform.
The striking thing about the case brought by OFAC was that in that first instance a decentralized platform was sanctioned, not a natural person or a legal entity with a specific physical location.
The complexity of defining responsibilities in these virtual platforms lies in their very design.As such, mixers can be created as an immutable and independent infrastructure, where no regulator can unilaterally control, alter or delete information.
Although the sanction was initially imposed on the platform, in August 2022 Alexey Pertsev was arrested in Amsterdam, developer of the Tornado Cash protocol, who, after a long judicial process, was found guilty in the first instance of money laundering in courts in the Netherlands and sentenced to five years and four months in prison in May of this year.
Some final thoughts
The advent of powerful technologies that make it possible to anonymize behaviors It raises new questions about what values should (and can) be prioritized in the new digital society.
Blockchain technology allows, with certain precautions imposed by regulators, to balance the right to privacy with the action of justice.
It is therefore not surprising that DLT (Distributed Ledger) technologies such as Blockchain are the ones that Central Banks mostly choose for the development of public digital currencies (CBDCs), with the exception that in these cases the Blockchains are not public, but require certain permissions.
Some private platforms are heading in the opposite direction, such as Telegram or Tornado Cash trying to further anonymize the identities of their users opening, intentionally or not, the door to facilitate crimes of all kinds.
Those who defend the lack of cooperation of these platforms with justice officials or authorities of democratic countries hiding behind a staunch defense of freedom of expression and the right to privacy They ignore the urgent need to effectively combat crimes of all kinds.
Organized networks aimed at committing abuses against the sexual integrity of minors, human trafficking or drug trafficking to mention some of the calamities that plague our societies They hide behind these technological platforms.
Despite their differences the defenses Durov (Telegram) and Pertsev (Tornado Cash) make similar arguments: those who run a platform, or those who develop it in a decentralized format, cannot be accused of misuse by criminals.
Ultimately, however, the accusations of justice do not target these platforms, but rather to the lack of collaboration (or directly to the complicity) of its managers or developers. when criminal acts of all kinds are involved under the rule of law.
Carlos Weitz – Former President of CNV and Professor of Fintech, Bigtechs, Cryptoassets and Digital Currencies. University of Buenos Aires.
Daniel Díaz – Professor of Information Technology. National University of Rosario
Source: Ambito
I am a 24-year-old writer and journalist who has been working in the news industry for the past two years. I write primarily about market news, so if you’re looking for insights into what’s going on in the stock market or economic indicators, you’ve come to the right place. I also dabble in writing articles on lifestyle trends and pop culture news.
