Excerpt
I explain what KYC (Know Your Customer) and AML (Anti-Money Laundering) mean and how these regulations impact Bitcoin users. Discover how these rules can compromise privacy and exclude people from the financial system. Watch now to understand why it’s helpful to use Bitcoin in a peer-to-peer manner!
Transcript
So at first, I would like to explain what the letters KYC and AML mean. KYC means know your customer identification, and AML means anti-money laundering. These are regulations that have been set in order basically by an international financial order that was founded after the First World War and then after the Second World War in the conference in Bretton Woods, where the 44 elite nations who won the Second World War came together and decided upon regulations to basically control the financial future of the world. The problem with that was it basically excluded almost all African nations and other nations, and these regulations have been extended over the years. So especially after the attacks on the World Trade Center in New York in 2001, the US took on new regulations to combat terrorism. In that sense, the regulations got tighter and tighter over the years, and it means that today 1.7 billion people are excluded from this financial system because these regulations trickle down to all countries in the world because as soon as a country is in need of a loan or something and wants to get it from the International Monetary Fund, they have to fulfill rules and regulations that come with that loan. And many of these regulations are banking regulations, so you can’t have a bank account, for instance, if you don’t own an ID. If you don’t have your passport or something, then you will not be able to get a bank account. The same goes for regulated cryptocurrency exchanges. Migrants and people who live in rural areas or who don’t have enough money to be like a good customer for the bank are excluded from the financial system. How do these regulations now restrict our privacy or infringe upon our privacy? Basically, they make us the target for crimes, they put us in danger, and they take away all our privacy. Many people say, “I have nothing to hide; I’m okay with that they collect all data because I’m not doing anything wrong.” This is true for many of us, but it’s also true for human rights activists, political activists, and the whole civil society in that sense. For people who are part of minority groups that are being discriminated against, because in a lot of authoritarian-ruled countries, these people need privacy. The more we are all looking that we have privacy, the more these people are protected too. That goes, for instance, for human rights activists. If you plan or work for more freedom in your country, then you are the target, or you will for sure be the target of the ruling people in power because they want to oppress you and they don’t want you to overthrow the government. So your privacy is very important for your security, your life, and safety. In Bitcoin, it’s important to know that every transaction on the Bitcoin blockchain is traceable. If you send someone bitcoin, then the person can look up the source of your transaction and see how many bitcoin you have in your wallet. If you’re a little bit more sophisticated or have access to software that does blockchain surveillance, then you can get a lot of information about what and where someone has spent their bitcoin. That puts people in danger because, for instance, if someone from a country in Europe sends bitcoin to someone in, let’s say, Zambia for any political movement or donating towards Bitcoin education and the government doesn’t want that, then they could look up where the Bitcoin came from. If they have the KYC data from the sender, then they know who it is. That’s what happens when you’re using a regulated exchange where you need to show your ID and where you’re being registered. Because as soon as you send the bitcoin you bought there to someone else, to another Bitcoin address, the recipient’s Bitcoin address is connected with your name, basically, that you sent this transaction to the recipient which puts everyone in danger. And that’s the reason why it’s a shame that software and tools that are being used to protect our privacy, to basically hide these traces on the blockchain, are the goal or the target of legal attacks at the moment. So for instance, the developer of Tornado Cash, which is a software with which you can upgrade the privacy of your coins, was arrested and recently convicted to five years in prison. Because and that’s the reason they said why he was convicted when he built the tool, he could have assumed that also money from illicit activities will flow into the system. And that’s the reason why he was convicted. It’s a little bit like saying, “Okay, you are a knife or a gun manufacturer; you should have known that this person is going to kill someone with that gun, and because of that, you are going to prison.” I mean this is ridiculous. It’s not happening in the world like that, but with cryptocurrencies, it’s happening. So, next point why KYC and AML are basically a threat to us is that all kinds of databases are being leaked, they’re being hacked. No data is secure. For instance, there was a case with Ledger, the hardware wallet manufacturer. In December 2020, it became known that they had a data leak. The customer database was leaked, meaning if you had bought a hardware wallet to store your cryptocurrency safe on a Ledger hardware wallet, then everyone now knows where you live, what’s your name, what’s your telephone number is, and what’s your email address. That makes it a perfect target because people can assume that you own cryptocurrency and know where you live. What we are building at the moment is a digital panopticon. And that’s basically … a panopticon is a prison that was invented in England in the times of the Industrial Revolution, where three guards were walking in circles in the building. And whenever they wanted to, they could look into the cells of the prisoners. The prisoners never knew when the guard would come around. So basically just imagine what kind of a cringe feeling this is. It almost suffocates me when I think about it, but this is what we’re building in the digital world as well, and what we already have. And if we’re not normalizing the fact that Bitcoin can and should be used without KYC regulations or know-your-customer databases basically, then everything we do will become transparent and no one of us will have any privacy anymore, and no one will have the possibility anymore to protest for their rights or for the freedom of their people. This is definitely not something we want to have, and that’s why it’s so important to use Bitcoin in a peer-to-peer manner.
