On Lawfare, former CIA analyst Yaya J. Fanusie assesses the weaponization – my word – of cryptocurrencies:
As the North Korean case highlights, two things enable cryptocurrency laundering: easy access to unhosted wallets and the existence of cryptocurrency exchanges around the world with lax anti-money laundering (AML) measures. Although the U.S. began regulating cryptocurrency exchanges in 2013, most other nations have lagged behind in applying AML rules to cryptocurrency activity. The intergovernmental Financial Action Task Force, which sets global AML standards, provided formal guidance in 2019 for how all countries should regulate their virtual asset sectors. But illicit actors will likely continue exploiting differences in national regulatory regimes to find noncompliant exchanges where they can trade crypto anonymously. Even this month, a Seychelles-based exchange announced it would cease U.S. operations so that it could onboard clients without verifying their identity. …
Legal and regulatory activity surrounding crypto and illicit finance will likely grow in the coming years as U.S. adversaries rely increasingly on cryptocurrency operations to fund threats. The U.S. Treasury now designates cryptocurrency addresses just as it designates bank accounts and other property, and the Justice Department is seeking to acquire funds held by 113 cryptocurrency accounts involved in the North Korean laundering transactions. With such enforcement actions likely to continue, intelligence analysts, sanctions compliance officers and financial crime investigators will need to become much more conversant with the world of crypto.
Fanusie structured this essay around an apparent North Korean hack of an exchange which netted the autocracy around $250 million. The easy lesson to draw is here is, if you really insist on holding & using cryptocurrencies, be careful of your exchanges.
The hard question?
I think the hard question is whether or not the unintended consequences of cryptocurrencies overwhelm the perceived advantages of cryptocurrencies. I am aware that cryptocurrencies were initially – allegedly? – devised to deprive governmental entities of control of money supplies. Financial histories are replete with accounts of countries printing money in order to satisfy debts, only to see inflation spiral out of control to the detriment of the citizenry. In fact – not following cryptocurrencies much – I have to wonder, or ask my readers, if the flip side of that desire has been considered: there are times when printing money by increasing the debt is highly desirable – such as the $2 trillion stimulus bill, now under consideration, to rescue workers left bereft as companies are forced to suspend operations in the face of COVID-19. Can cryptocurrencies display enough flexibility to perform the same function – save citizens from undeserved financial disaster – even if not in the same way?
But, more importantly, I have to wonder if the cryptocurrencies invented and enabled by the West are being used by its adversaries to damage the West. North Korea, despite the imbecilic blather of President Trump, is no friend of the United States, and would happily see us drown in our own toxins, helping it along if possible. So would Russia and, probably, China – all have national ambitions unblunted by the terrible wars that have left Europe unsettled for more than a century.
And while I have little reason to doubt the idealistic goals of the progenitors of the primordial cryptocurrency example, bitcoin, I do have to wonder about other cryptocurrencies, as well as the founders and managers of exchanges. Are their motivations congruent to the original, or merely pecuniary? Almost regardless of the answer, is this blinding them to the existential dangers they let loose by chasing their dreams? Remember this?
Even this month, a Seychelles-based exchange announced it would cease U.S. operations so that it could onboard clients without verifying their identity.
That would worry me a lot if I were in cryptocurrencies. While there is certainly more than one lesson in history concerning mismanagement of the money supply by government entities for personal or nationalistic reasons, there is an argument to be made that better societal management through responsible selection of leaders is far more appropriate than simply leaving in an outraged huff and taking one’s marbles into the bear’s den – which may turn out to be an accurate description of cryptocurrency advocates’ actions.
