Yaya J. Fanusie is the director of analysis for the Center on Sanctions and Illicit Finance, a program run by the Foundation for Defense of Democracies, a nonpartisan national security think tank in Washington, DC. His research focuses on the national security and illicit finance implications of cryptocurrencies and blockchain technology. He previously worked for several years as a counterterrorism analyst. You can follow him at @SignCurve on Twitter.
1. What initially sparked your interest in blockchain?
Blockchain technology first came on my radar in 2015 when I started looking at how criminal groups were taking advantage of new financial technologies like Bitcoin. But I started to focus more deeply on it, from a more positive point of view in 2016 when I began researching how tech innovation could be used to improve financial transparency and even combat crime and corruption. This was around the time when Apple and the FBI were clashing due to the encryption of the iPhone used in the San Bernardino terrorist attacks. The conversation about the tech community and the US government at the time was a polarizing one, with many people focusing on tech firms and innovative technology as hurdles to US national security. As a former intelligence analyst, I knew that government personnel working to counter terrorism, human trafficking, and other illicit activities used tech products on a daily basis, especially for data analytics. So I started considering how, in some ways, blockchain technology theoretically could make analysts’ jobs easier when trying to uncover illicit financing. For example, a lot of money laundering occurs because there is not enough public information available on who owns various shell companies. Analysts spend a lot of time tracking down such information manually through multiple corporate registries and I began to think that having such data integrated into a blockchain platform could help with analysis.
2. What role do cryptocurrencies play in funding illicit financial activities?
It depends on the type of illicit activity. In the realm of cyber crime, cryptocurrencies are a major component because they’re the native currency for the digital world. Cybercriminals deal a lot with code and programming, so there’s a natural fit. People who specialize in online fraud also fall under cyber crime, so you should keep in mind that all those “I’m giving away ETH” scams on Twitter count as illicit financing. On the other end of the spectrum, you have terrorism, where cryptocurrencies have not played a major role outside of some experimentation, mostly in small crowdfunding campaigns. However, I’m concerned that terrorist groups’ skill levels aren’t static and they seek, learn, and adopt new methods and technologies if they prove effective.
Really, the way to look at this is to simply consider adoption. As cryptocurrencies gain wider adoption, you can expect that they will be used more for funding illicit activities, just as bank transfers, credit cards, and international money transmitters get used because they’re widely accessible and reliable means of transferring financial value.
3. What can a civic-minded blockchain enthusiast do to help governments agencies understand blockchain?
Apply to work for the government. Seriously. Consider a career in public service. Or working for a government contractor. I think government in a few years will start actively selecting people with crypto/blockchain knowledge for all types of agencies. Not just law enforcement or intelligence. Outside of that, I’d say that blockchain enthusiasts should being more mindful of the ways that this technology can impact our lives, positively and negatively. We need to have more balanced conversations, not people just saying that crypto is all bad or people saying it’s all good. It’s important to look at this tech for both its benefits and for how it will undoubtedly be exploited, as happens with all technology.
4. What is the most important fact every government official must understand about cryptocurrencies?
Fact: Cryptocurrencies solved the digital spending problem; the problem where, in the digital realm, you previously could not transfer financial assets without an intermediary. Whether you think cryptocurrencies are going to be valuable in the future or not, I don’t think you can dispute that this was a technological breakthrough, especially since digital activity in our society is becoming more pervasive. For that reason, blockchain tech deserves attention as the developers in the space experiment and the market eventually determines how this breakthrough is going to be applied more broadly.
5. How can local governments use blockchain technology to foster economic development in their communities?
Actually, I wouldn’t say that the key would be for local governments “to use” the technology at the moment. There really aren’t many tried and true blockchain applications that would directly help economic development right now. What I would encourage is for local governments to encourage blockchain technology education and exposure at their middle/high schools, community colleges, and 4-year institutions so that you have graduates who are aware of the technology and will be able to access the entrepreneurship and employment opportunities which will be available to those who are attuned to the crypto/blockchain industry. I know some people say this technology is changing so fast that you can’t rely on teaching it in a course. But I’m talking about teaching the general features and broader nomenclature so the up-and-coming generation at least knows what this technology is, what it generally does, and ways it could open up new business models and even solutions for civic problems. Local governments should also have at least someone following the industry and looking to make partnerships and investments (not necessarily in money, but in time and attention) with this space for the future. Imagine if local governments in the early 1990s had the foresight to partner their schools and institutions with the pioneering minds and firms of the Internet boom. Since the crypto/blockchain space is more dispersed than Bay Area-based startups of the Internet boom, there’s no reason why engagement with this technology has to only occur in Silicon Valley. There’s nothing technically stopping places like Baltimore, Maryland; Omaha, Nebraska; and Jackson, Mississippi from deciding that they want to become a part of the blockchain tech phenomenon which is growing so quickly.
Portia Burton is founder of Blockchain Explainer, and specializes in coding blockchain proof of concepts.