Op-Ed: A Business Case for Privacy in a Crypto Economy

For centuries, governments with a global presence have always thought that they could benefit the world if only they were given more time and more money.

In some countries, the time aspect is controlled by general elections and term limits, even though a similar party usually takes over and not much changes. The more immediate problem, however, is making sure there is enough money to accomplish what most global leaders think will benefit society, their voters and quite often, benefit themselves to remain in power.

With the global economy looking like it’s slowing down, as major countries begin to damage their trust in each other by enacting economic sanctions, most developed nations are beginning to get more aggressive about anti-money laundering (AML) and know-your-customer (KYC) laws.

Governments are now looking to claw back lost tax revenue, as well as demand higher transparency on the movement of money across the financial networks. For example, recent regulations by the US, such as FBAR and FATCA, have drastically altered the way in which people, organizations and companies manage their global wealth, even in cases where anonymity is not the primary goal.

But let us now entertain the notion that the majority of this wealth abroad is there for purposes of anonymity—whether for avoiding taxes or corrupt governments, funding underground economies, criminal activities, or perhaps just making charitable donations without questions.

In the modern era, high-net-worth individuals have enjoyed the banking secrecy laws of Switzerland; tax havens, offshore banking entities like the Cayman Islands, Seychelles, Bermuda, Isle of Man, and the British Virgin Islands; and the low tax jurisdictions in recently developed markets such as Singapore and Hong Kong. 

So what happens when this structure starts being challenged, as with the Swiss being required to identify numbered accounts to other governments? Will those people or entities all of the sudden comply with new regulation, confess their sins, and change their ways? Or are they going to look for an alternative?

Apple has been in the news lately for avoiding taxes, thanks to friendly jurisdictions like Ireland; so expecting them to change their ways is just another example of governments wasting time and other people’s money. Large corporations, high-net-worth individuals and the politically connected will always have their team of lawyers to guide them in their quest for the most optimal options in wealth preservation. In today’s digital world however, the options to those on top can be the same as to those trying to move up the ladder, and most likely, highly compensated advisors are already looking into solutions for the future.

Here lies the major opportunity for an anonymous cryptocurrency that can be transported from point to point in a cost effective way, while not publishing transactions on an open ledger. Darkcoin, with all its properties, has a way to achieve this goal even better than an anonymity layer on top of the Bitcoin blockchain.

The need to move value across a decentralized network in an unpublished and nonpublic way should never be underestimated. It meets the requirements of many wealthy individuals looking to secure and preserve their wealth from governments, when those individuals don’t agree with how the governments spend tax revenue, or perhaps such individuals are just looking to expand their business globally and pay a small-time freelancer to do some work without filling out an endless amount of paperwork. 

There are even more legitimate uses, such as supporting good charities in countries that are not held in high esteem, and making sure there are no accidental associations that will be a nightmare to resolve. The applications are endless for an anonymous cryptocurrency at a time when banks are forced into transparency and bullied into being policemen by sharing client data for the sake of not being legally pursued in jurisdictions such the US.

At the very heart of it, a privacy-oriented cryptocurrency like Darkcoin can be the antidote for hard lined and aggressive regulations like FATCA, which forces Americans to completely disclose assets in a manner that does not allow any privacy of wealth. Recently, banks have even created a business line called "private banking," with the interest of helping their customers protect their wealth, allowing customers to have more freedom in how and where they choose to place their assets. 

If we believe that people have the right to choose not to disclose their wealth to governments with draconian tax regulations, then anonymity in wealth will always have a purpose in the world—even when there is no option to hide cash under the floor—as the world moves on to digital currencies, and more likely, cryptocurrencies.

Those with wealth to protect will always look for services that allow them to not be completely visible with their assets. But now everyone can have an equal opportunity to achieve this goal, not just those connected to the right resources.

David Shin is an investment banker in equity derivatives, with over 10 years experience, who is now looking to bridge the gap between cryptocurrencies and financial institutions. David has been involved in several Hong Kong startups, including PayWise and CryptoMex, and he is a founding member of the Bitcoin Association of Hong Kong. He has appeared on many media platforms in Asia and globally, discussing the disruptive benefits of cryptocurrencies.

Did you enjoy this article? You may also be interested in reading these ones:

Proof of Work, Proof of Stake and the Consensus Debate Who Will Regulate the Regulators? (Op-Ed) Localbitcoins Germany Withdrawal Raises Questions about Regulation