Yesterday, an expert witness testified before a US Senate subcommittee on the link between cryptocurrency and human trafficking. He presented a series of recommendations to disrupt this abhorrent industry. One of which proposes for cryptocurrency miners to comply with legacy anti-money laundering legislation. Which, if implemented, would stifle blockchain payments.
Cryptocurrency Is A Channel That Enables Human Trafficking
In his address to the Senate subcommittee, David Murray, VP of the Financial Integrity Network, a Washinton DC-based advisory firm, began by drawing attention to the enormous profits involved in human trafficking. He said:
“Developed economies are the most profitable for human traffickers, with criminal organizations earning more than $34,000 annually in profit from each victim in North America.”
Murray then went on to say that human trafficking interacts extensively with the entire financial system. Unlike other criminal industries, for example, drugs trafficking, which is mainly a cash business. Whereas human traffickers use cash, retail payment systems, online payment systems, and cryptocurrencies.
The problem lies in areas of the financial system with poor transparency, which Murray pinpointed as small payments carried out through retail payment systems, online payment systems, cryptocurrencies, and large payments carried out through anonymous companies.
As such, Murray made three recommendations aimed at improving financial transparency across the board. His second proposal targets cryptocurrencies by way of creating a new class of financial institution – the “virtual asset transaction validators.”
And in essence, just like legacy financial institutions, cryptocurrency miners would be required to carry out due diligence on counterparties. This would involve controlling network participation by overseeing any issuers, exchanges, or custodians they serve.
Murray argued that this is necessary because:
“The lack of system-wide financial crimes compliance (FCC) governance for some existing cryptocurrencies allows criminals space to operate and makes it difficult for the United States to isolate rogue service providers from the U.S. financial system.”
More Legislation Only Impinges Our Freedoms
The fallout from Murray’s proposals has not been positive. While there is no denying that human trafficking is a despicable crime, perhaps this is a step too far.
Implementing these proposals would almost certainly shackle the entire US cryptocurrency mining industry. Perhaps leaving only large corporates, with the resources to comply, as the sole operators.
On that note, Peter Van Valkenburgh, Director of Research at the Coin Center, said:
“It’s couched as regulating but what it would be is an effective ban on American persons or businesses using open blockchain networks because it would require them to use it on a permissioned basis.”
Moreover, Valkenburgh sees sense in a certain level of anonymity. For example, in the case of Hong Kong protestors concerned about being tracked by the Chinese government.
And once again, legislative proposals impose a disproportionate amount of force, resulting in the loss of more personal freedoms — a situation many crypto advocates balk at.
BREAKING: Former U.S. Treasury official urging Congress to regulate crypto miners.
"…is an effective ban on American persons or businesses using open blockchain networks"
In other words, their running out of reasons to stop bitcoin.
— Rhythm (@Rhythmtrader) September 3, 2019
Featured Image from Shutterstock