Wendy McElroy: Privacy Prevents Violence and Crime

(Crypto) Privacy Prevents Violence and Crime

The Satoshi Revolution: A Revolution of Rising Expectations.
Section 2 : The Moral Imperative of Privacy
Chapter 6: Privacy is a Prerequisite of Human Rights
by Wendy McElroy

(Crypto) Privacy Prevents Violence and Crime (Chapter 6, Segment 1)

Unlike the communities traditionally associated with the word “anarchy”, in a crypto-anarchy the government is not temporarily destroyed but permanently forbidden and permanently unnecessary. It’s a community where the threat of violence is impotent because violence is impossible, and violence is impossible because its participants cannot be linked to their true names or physical locations.

Wei Dai

A February 6, 2018 headline in Reason magazine warned, “Governments Hate Bitcoin and Cash for the Same Reason: They Protect People’s Privacy.” The ensuing article spun off a quote from U.S. Treasury Secretary, Steve Mnuchin, “One of the things we will be working very closely with the G-20 on is making sure that this doesn’t become the Swiss numbered bank accounts.” Mnuchin rejects decentralized crypto as payment, investment, or savings systems because it cannot be easily tracked by government.

Privacy is the battleground upon which cryptocurrency will ultimately rise or fall.  The engine of crypto, the blockchain, is founded on the premise of anonymity or pseudonymity. The blockchain was specifically designed to obsolete “trusted third parties,” such as central banks, which act as data-collection centers for government.

Wei Dai and Mnuchin may seem to be polar opposites on privacy, but they are saying much the same thing, although their conclusions are antithetical. Privacy prevents violence.

For Wei Dai, this is a good thing. Privacy is overwhelmingly positive for individuals because it empowers and protects them against government. Privacy can cloak genuine acts of violence or fraud, of course, just as free speech can promote lies; every tool can be a weapon. More often than not, however, the violence prevented is wielded by government against those who flaunt authority: tax evaders, dissenters, regulation breakers, gray or black marketeers, drug dealers and users. Government punishes scofflaws, whether or not the laws are just or despite the fact that participants consented. To cryptoanarchists, like Wei Dai, no crime has occurred unless a person is injured or property is damaged. The violence occurs when a third party forcibly intervenes between consenting adults or people minding their own business.

For Mnuchin, privacy’s role in preventing violence is a bad thing because he administers government coercion against peaceful individuals. Of course, he does not call it violence; he calls it law enforcement. That doesn’t change the fact that government agents are pointing guns at peaceful scofflaws, not at the behest of any participant, but over their objections.

Otherwise stated: Wei Dai praises privacy for promoting a society of “anything that’s peaceful.” Mnuchin excoriates privacy for the same reason.

The ongoing crack-down on privacy is legitimized to the public by the faux claim that only criminals want “concealment.” (The Satoshi Revolution debunks this claim in the segment entitled “What Do You Have to Hide? Everything!”

Defenders of privacy usually give weak-tea arguments. Instead, they should straighten their spines, stand tall, and argue from high ground. The high ground: privacy and human rights are, and always have been, intimately connected concepts that enable individual freedom. Government wants people to abandon privacy because they would be abandoning a powerful threat to its authority.

Privacy, qua privacy, is so essential to human rights that it is indistinguishable from them.

The History of Privacy and Rights

(Here, privacy means “an individual’s right to control unrevealed personal data.” If someone voluntarily fills out a government form or otherwise broadcasts personal information, then he loses the right and the power to control its future distribution. But unrevealed data can be externally demanded only through violence; people can be coerced into revealing the contents of their mind; homes can be ransacked and computers can be hacked. Crypto-privacy, as epitomized by private keys, is unrevealed information, after which the government hungers.)

History can be viewed as a long social and intellectual experiment.

Pretend you are God. You perch attentively above the time-space continuum in order to watch the flow and impact of concepts upon human development through the centuries. The American Revolution feeds into and inspires the French one. The British Empire begins in the 16th century as Britain establishes its first colonies that, in turn, encourage mercantilism; after World War II, what remains of the Empire collapses in the face of independence movements based on an anti-colonialism that favors communism. From the mid-16th century, the British drove the Transatlantic Slave Trade until confronted by anti-slavery voices that said “every human being is a self-owner.” History is a laboratory in which the social and political affect of concepts can be charted, including the effect of privacy. Admittedly, the results are not as measurable as those produced by science, but broad outlines and conclusions are clear.

Arguing from history provides powerful advantages. To those who value facts, concrete examples can be compelling and persuasive. Moreover, drawing on history allows the cryptocurrency community to correct a fatal mistake; namely, it is defensive about privacy, when it should be on the offense because crypto stands on the moral high ground.

Financial independence is not the place to begin to demonstrate the link between privacy and human rights because anything to do with money arouses immediate cynicism. Money produced by work and through merit is the root of all good; it feeds families, fuels invention, and raises prosperity for all. Wealth from honest effort is to be celebrated, emulated, and protected from looters.

But money has been demonized as “the root of all evil” by those who never seem reluctant to accept it as donations, payment, taxes, or other forms of theft. The pervasiveness of plunder is a testament to the incredible power of wealth. But  plunder must be justified, or else it will be seen to be the outright money-grab it is. Thus, money and anyone who resists the theft of it are demonized as criminals or otherwise morally corrupt.

A better place to begin to link privacy and human rights is freedom of religion and due process. A pivotal insurrection in the 16th century defined the evolution of both within Western society. It revolved around a person’s right to keep his religious beliefs private so they could not be used against him in a court of law. A current version of this right is called “taking the fifth” — invoking the due process right against self-incrimination. Although this mainstay of due process is often portrayed as the last legal recourse of a guilty man, the intended and overwhelming beneficiary is the man in the street who, whether he realizes it or not, is protected against the exercise of arbitrary power.

The insurrection has background. In 1534, Henry VIII denied papal authority and established the Church of England, which maintained most of the traditional Catholic rites. Thus Protestants, called dissenters, were often tried for heresy; torture commonly accompanied trial. In the late 1530s the Protestant John Lambert was burnt alive for heresy. During his trial Lambert became the first known Englishman to proclaim it was illegal under God and the common law to compel a man to accuse himself. He appealed to the privacy of conscience.

The right to not bear witness against oneself had precedent in common law, but it was not enforced in English courts until in the late sixteenth and early seventeenth century. Its roots are deep in the history of religious persecution. Courts of the day required a defendant to answer a barrage of questions based on evidence gleaned from witnesses or informants, without informing the accused of the charges being brought. The interrogation aimed at trapping a defendant into a confession. People were tried on mere suspicion and, if found guilty, they were required to name other heretics. Silence was deemed a confession.

In 1563, John Foxe published the immensely influential Book of Martyrs, which has been called a “libertarian primer” on procedural rights. He argued for the right to remain silent. The right to keep personal information private.

Famously, the Leveller and libertarian John Lilburne employed Foxe’s procedures in 1637, when he was brought before the Court of Star Chamber for circulating Puritan books. Rather than being charged, Lilburne was asked how he pled. Refusing to take the customary oath, he declined to answer questions that bore witness against himself. Lilburne was fined, whipped, pilloried, and sentenced to prison until he complied. While in prison he penned an account of his brutal treatment entitled The Work of the Beast. In 1641, when the much-hated Star Chamber was abolished and the right to remain silent established in religious courts, Lilburne was widely credited.

Puritans who escaped religious prosecution to the New World carried Lilburne’s ideals, even though various colonial courts used torture to elicit confessions and required defendants to testify against themselves. By the time the colonies were states, however, six had clauses in their Constitutions against self-incrimination, and several others verged on including them. The right of a defendant against physical compulsion to speak was established at the national level in the Bill of Rights’ Fifth Amendment: “No person … shall be compelled in any criminal case to be a witness against himself….”

The right against self-incrimination – the privacy of personal information —  lies at the core of due process. It is historically anchored in the quest for religious freedom. It served as the strongest single protection against the use of torture by state authorities.

Privacy Under Attack Means Rights Are Under Attack

The human right against self-incrimination is currently under concerted attack by those who pit it against “security” or other governement interests, such as preventing tax evasion. The shrill demand for encryption keys and private crypto keys are two examples of government’s onslaught against privacy.

Privacy – the right to shut your front door, the right to be silent — has been protected for so long that it is taken for granted. People forget; privacy was established by those willing to be tortured and killed rather than to surrender  intimate information to enemies. The great wrongs of past governments were corrected and prevented by the blood of stubborn dissenters. The great wrongs are destined to be repeated unless privacy, like wealth, is celebrated, not demonized.

[To be continued next week, with how privacy was a core concept of the American Revolution.]

Reprints of this article should credit bitcoin.com and include a link back to the original.

Wendy McElroy has agreed to ”live-publish” her new book The Satoshi Revolution exclusively with Bitcoin.com. Every Saturday you’ll find another installment in a series of posts planned to conclude after about 18 months. Altogether they’ll make up her new book ”The Satoshi Revolution”. Read it here first.

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Korean Government Answers Petition Against Unfair Cryptocurrency Regulations

Korean Government Answers Petition Against Unfair Cryptocurrency Regulations

The South Korean government has officially responded to the popular petition, with over 20,000 signers, against unfair cryptocurrency regulations. The regulators defended their crypto measures and outlined additional regulatory plans.

Also read: Japan’s DMM Bitcoin Exchange Opens for Business With 7 Cryptocurrencies

Popular Petition Answered

South Korea has answered the petition entitled “Has the government ever dreamed a happy dream for the people?” Filed on December 28, the one-month petition asks the government to avoid excessive regulations for cryptocurrencies in the country and “not make unfair regulations on virtual currency investment.”

According to the rules set by the Blue House, the government will respond to any petition with over 200,000 signatures within a month. On January 16, the above petition surpassed that threshold, as news.Bitcoin.com previously reported. By January 27, a total of 228,295 people had signed and the government subsequently responded to it on Wednesday.

Korean Government Answers Petition Against Unfair Cryptocurrency Regulations
“Has the government ever dreamed a happy dream for the people?” petition which ended on January 27.

Hong Nam-ki, Minister of the Office for Government Policy Coordination (OPC) said in his response:

It is the basic policy of the government to prevent illegal acts and uncertainties in the process of virtual currency transactions, and actively nurture blockchain technology…Transparency of virtual currency transactions within the framework of the current law is a top priority…We have been attentive and careful, keeping an open eye on market conditions, international trends, and all means”

Government Still Divided on Regulations

Korean Government Answers Petition Against Unfair Cryptocurrency Regulations
Hong Nam-ki.

The Korean government started announcing regulatory measures for cryptocurrencies in the middle of December. Since then, the regulators have considered a wide range of measures to curb speculation of the crypto market. They implemented the real-name system on January 30, ending anonymous crypto trading via virtual accounts.

The most extreme measures have been proposed by the Korean Ministry of Justice, including an outright ban on cryptocurrency trading and closing down crypto exchanges. However, other financial regulators in the country did not support these proposals. Last week, the Korean prime minister stated that closing down crypto exchanges is not a serious consideration.

Hong was quoted by Reuters on Wednesday:

The government is still divided with many opinions ranging from an outright ban on cryptocurrency trading to bringing the institutions that handle the currency into the system.

In addition, he explained that the regulators will “develop ways to tax virtual currencies, led by the finance ministry, and should announce measures within the first half of the year to develop the blockchain industry.”

What do you think of the South Korean Government’s response to the petition? Let us know in the comments section below.

Images courtesy of Shutterstock and the Korean government.

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The Satoshi Revolution – Chapter 5: ICOs – Peril or Menace or Expression of Satoshi Spirit? (Part 2)

ICOs - Peril or Menace or Expression of Satoshi Spirit?

The Satoshi Revolution: A Revolution of Rising Expectations.
Section 2 : The Moral Imperative of Privacy
Chapter 5: Implementing Crypto Privacy
by Wendy McElroy

ICOs: Peril or Menace or Expression of Satoshi Spirit? (Chapter 5, Part 2)

It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair, we had nothing before us, we were all going direct to Heaven, we were all going direct the other way…

– Charles Dickens, A Tale of Two Cities

Crypto advocates differ dramatically on the impact of Initial Coin Offerings (ICOs). They are a valuable dynamic that financed Ethereum’s smart contract; they are a blank cheque for scammers; they give government a wedge with which to separate cryptocurrency from freedom. The damnable thing is that all the assessments may be correct.

What does this have to do with privacy? In my opinion, current ICOs are regulation bait. The bad behavior of some ICOs and the recent hacks of others provide the perfect justification for governments to clamp down, not only on ICOs but, perhaps, on all cryptocurrency. Just as centralized exchanges are becoming quasi-banks, which are the “trusted third parties” Satoshi reviled the most, ICOs could come to resemble securities or private equities. In some places, that process is underway. The regulation gives government access to additional funds, of course, but it also provides detailed information on every investor. It nationalizes another bastion of free-market finance.

What is an ICO?

An ICO is a type of crowdfunding or crowdsale for startups, which allows them to generate capital while bypassing the restrictive requirements and costs of regulatory compliance and of dealing with intermediary financial organizations. A startup allocates a specified number of “tokens” to early investors in exchange for an established “money,” often bitcoin. The token is a pre-mined cryptocurrency that is issued by the startup. If the crowdfunder’s financial goal is not met, then the money is supposed to be returned to investors.

Some startups add incentives, which vary: dividends on future products, or services, for example. But the main incentive: if the financial goal of the crowdfunding is met, and when the ICO goes public, the token holders may see their investment soar in value. The tokens become a functioning currency, with a value linked to that of the startup. In 2014, for example, Ethereum’s ICO raised $18 million, which made each Ether coin worth approximately $0.40 US. Today (January 26, 2017), the price hovers around $1050.

The Disagreement

Some crypto advocates believe ICOs embody the original spirit of Bitcoin. Marcel Chuo of bitcoin.com wrote, “ICOs allow any investors around the world to have complete freedom to choose how to invest their money. By contrast, private equity is restricted to ‘accredited investors’ which is the result of a bunch of rich people pressuring the government to set up barriers to the common folk making money…” It is a fair and accurate point.

An accredited investor is a person who is rich enough to qualify for a government-granted privilege; he is allowed to invest in so-called high risk ventures, like startups, while the average person is prohibited. It is a financial privilege accorded to the upper echelon of wealth. Regulations vary from country to country, but the American ones are typical. The Securities and Exchange Commission (SEC) offers one of three ways to qualify. The individual (or entity) must have an annual income of $200,000 or a joint one of $300,000; he must have a net worth of over $1 million; or, he must be a general partner, executive officer, or somehow in business with whomever is issuing the security. Common people are deemed to be too stupid or unsophisticated to take such financial risks. They are generally restricted to investing in mutual funds and other low-risk, low-return vehicles.

Importantly, accredited investors must file a regulatory disclosure form with the SEC, which lays open their finances to government.

Cryptocurrencies and non-regulated ICOs blow past the legal privileges of the rich. They open a wide window for the average person to invest by the same rules as the rich, while skirting reporting requirements. Cryptocurrencies and non-regulated ICOs give average people the chance to profit hugely by taking a risk.

Of course, it is also possible to lose hugely. Under the best of circumstances, startups are high risk. The best of circumstances include – and, perhaps, rest upon – the honesty of those conducting the ICO. But even legitimate startups can go bankrupt, be hacked, be shut down by government, or collapse for another reason. Without honesty, however, the ICO is a scam.

ICO scams seem to have increased in recent years. Several factors are at work.

A feeding frenzy for crypto has descended on investors, and many of them do not act wisely because they fear missing the next, best thing. ICOs have also become a fad, akin to the dot.com fad in the late 1990s; the dot.com bubble collapsed circa 2001. Like many of their ill-fated predecessors, some ICO offerings now seem to rest on nothing but talk. Yet, they draw investors. An article in Quartz (July 07, 2017) reported, “A cryptotoken called ‘Useless Ethereum Token’ has raised over $40,000 in just under three days. Here’s its pitch: ‘UET is a standard ERC20 token, so you can hold it and transfer it. Other than that… nothing. Absolutely nothing’.” The useless, gag crypto reportedly raised 310.445 in Ether, $324,120 in US currency, and it issued 3,965,716.097 tokens. The investments occurred despite a header on the main website, which declared, “You’re going to give some random person on the internet money, and they’re going to take it and go buy stuff with it. Probably electronics, to be honest. Maybe even a big-screen television. Seriously, don’t buy these tokens.”

Useless Ethereum called itself, “The world’s first 100% honest Ethereum ICO.”

But there are blatantly dishonest ICOs. Crypto-veteran Kai Sedgwick recently wrote, “Benebit, one of this year’s most hyped ICOs, has pulled an exit scam, making off with a reported $2.7 million of investor funds. Other estimates put the figure as high as $4 million. The fraud only came to light after someone noticed that the team photos had been stolen from a school website. Once this happened, the Benebit team scampered…” Benebit had been endorsed by many respected ICO forums and sites, such as the clearinghouse ICO Syndicate. In short, due diligence would not have saved investors from losing their life savings.

And, then, there are the honest ICOs and exchanges that are simply incompetent. On January 26, 2018, a team from the Japanese Coincheck exchange held a press conference to discuss the theft of between $400 and $534 million; the vagueness comes from whether the stolen funds are assessed at the time of investment or their current value. A hacker cleaned out the exchange’s crypto in a single transaction because it seems to have been held in one hot wallet, which had no multi-sig. In short, the security resembled swiss cheese. Coincheck was one of the respected exchanges; ICOs are far more notorious for bugs and vulnerabilities.

Phoney or incompetent ICOs may seem humorous to non-investors, but there is sobering aspect that could easily affect them. Bad ICOs draw government regulation. In fairness, both ICO successes and scams are regulation bait.

An instance of attacking their success: In early September, 2017, China banned ICOs as being disruptive to financial stability. Translation: crypto and free-market ICOs were so popular that government could not control them. The ban appears to have been a means to clear the financial decks in order to allow only ICOs that function under government control to return. A headline (January 26, 2018) in The Bitcoinist stated, “Chinese Official: New Regulations for 2018 May End ICO Ban.”

If so, only “official” ICOs will be permitted, including ones conducted by government agencies.

Meanwhile, the SEC takes a different tack, which is no less damaging to financial freedom. It has started to classify some tokens as securities and to prosecute startups that issue them for violating federal security regulations. An article in CNBC (January 25, 2018), entitled “SEC devoting ‘significant’ portion of resources for catching cryptocurrency scams,” warned that the SEC “isn’t making much distinction between security and utility tokens, and that securities law applies to at least some cryptocurrencies.” Soon, SEC regulation may apply to all ICOs. Even if it does not, who would issue tokens with the risk of SEC persecution hanging over the process?

Complying with securities regulations is an onerous process. Of course, there are exceptions to when an investment is labelled a “security.” One is if only accredited investors are accepted. This returns the rich to a position of financial privilege, which may be part of the SEC’s goal.

ICOs started as innovative vehicles that allowed average people to invest in startups, and allowed startups to bootstrap themselves without government obstruction. There was always room for scamming, however. Many ICOs now defraud innocent people and give government a perfect excuse for regulation.

Government will only accept crypto and its related manifestations, such as ICOs, if it can be in control of them. Grabbing the wealth is certainly one goal but social control is another. The key to both is information. The looting of data is about to accelerate. Precaution should as well.

[To be continued next week.]

Reprints of this article should credit bitcoin.com and include a link back to the original links to all previous chapters

Wendy McElroy has agreed to ”live-publish” her new book The Satoshi Revolution exclusively with Bitcoin.com. Every Saturday you’ll find another installment in a series of posts planned to conclude after about 18 months. Altogether they’ll make up her new book ”The Satoshi Revolution”. Read it here first.

The post The Satoshi Revolution – Chapter 5: ICOs – Peril or Menace or Expression of Satoshi Spirit? (Part 2) appeared first on Bitcoin News.