Financial Privacy: Fundamental Human Right or Danger for Society?

When talking about ‘privacy coins’, one question is almost inevitable:

Is financial privacy a fundamental human right, or does it pose a risk to society?

It is particularly the regulators who are using half-true arguments in favour of the latter, when they say that privacy coins are being used to launder money, facilitate terrorism financing or are being used to buy drugs on the darknet.

While this is not completely false, hence the emphasis on ‘half-true’, it does paint a false picture. Yes, users can use privacy coins for those purposes, however, what has been cash fiat money being used for, for centuries? What about the fact that financial institutions are violating people’s rights by collecting information about their customers, exceeding their legitimate purpose, and in that helping private companies or government bodies gather a profile on their customers.

In this article, we will delve deeper into the concept of financial privacy and the actual usage of privacy coins. We will compare this with the situation for cash money to demonstrate to our readers that yes, financial privacy and the usage of privacy coins are indeed a fundamental human right!

Myths Sold As Facts: Why A Lot Of Allegations Are Untrue

As mentioned earlier, there are some classics among the arguments of the people and institutions in charge. One of the most mentioned is the claim that cryptocurrencies are used for illicit purposes. Let’s have a look at some statistics in this regard. And, while we are doing this, do not forget that we are looking at cryptocurrencies in total, not even at the small sector of privacy coins such as XMR.

Chainalysis, one of the most prominent blockchain analytics companies, publishes a ‘crypto crime report’ early every year since at least 2017. They capture the total on-chain volume of provably illicit addresses and categorise them, ‘CSAM/Human Trafficking’, ‘Ransomware’, ‘Darknet Market’, ‘Terrorism’, and so on. Here the statistic for each year from 2017 to 2022:

The total volume caused by ‘illicit addresses’ rose from $5 Billion USD worth of cryptocurrencies in 2017 to $20 Billion USD worth in 2022. The biggest part over all those years was caused by cryptocurrency-scams; the Plustoken scam, which blew up a few years ago, was alone worth more than $1 Billion in cryptocurrency. Unfortunate for the victims, but also not quite what we are looking for.

The next biggest factor are darknet market transactions, which had their peak in 2021 at around $3 Billion, followed by ‘stolen funds’ that increased strongly in 2021 and 2022, causing a damage of ~$3–4 Billion for each of those years. In contrast, ‘ransomware’ is a relatively smaller part. When looking at CSAM/human trafficking and terrorism financing, we cannot even see it in the diagram.

Billions of US-Dollars sound much, and of course it is a lot of money, but now let’s have a look at the numbers of the ‘real world’, meaning how much FIAT money is used by criminals in those areas:

• Human Trafficking: According to the DHS, this crime-sector rakes in $150 Billion in estimated annual global profits.
• Drug Trade: According to the European Parliament, the annual street sales value of illicit drugs is estimated to have reached over $500 Billion per year.
• Money Laundering: Worldwide, criminals are laundering money to the tune of $800 Billion up to $2 Trillion every year

In comparison, the numbers caused by the illicit usage of cryptocurrencies seem laughable. The biggest part, money laundering, also does not rely on digital currencies but rather the traditional financial system.

Money Laundering: FIAT is King

Dirty money (big part cash) gets placed into the financial system, then, through layering, the traces are obfuscated, transferred from offshore bank to offshore bank before it is loaned to shell-companies. X pays a false invoice of Y and at the end the money gets ‘cleaned’ by purchases of luxury assets like real estate, financial or industrial. An old system that works for centuries; and they say cryptocurrencies like BTC and ETH are the dangerous ones?

To remind you again: We are not even talking about XMR & Co. here. Their illicit volume makes just a tiny fraction of the already ‘tiny’ fraction of illicit usage of cryptocurrencies in total. To say that ‘privacy coins are dangerous because they are used often by criminals is just ridiculous, to say the least.

If one wants to point fingers then why not into the direction of certain banks, such as Credit Suisse or HSBC? On February 7, 2022, news came out that revealed that Credit Suisse, one of the biggest Swiss banks, was facing money laundering charges in a Bulgarian cocaine trafficker’s trial. They allowed ‘an alleged Bulgarian cocaine trafficking gang to launder millions of euros, some of it stuffed into suitcases.’

On December 17, 2021, HSBC was fined more than $70 million for anti-money laundering failings. ‘The Financial Conduct Authority (FCA) said weaknesses in HSBC’s financial crime safeguards had been highlighted several times before action was taken.’

Or what about the Panama Papers? They showed, back in the days, the involvement of companies, politicians and public figures in big fat money laundering schemes.

Still, governments, regulators and even banks are accusing private-finance enthusiasts to be the bad guys. Alleging ties to the criminal underworld and societal harm. Is this because they do not know any better? Or is it rather that they know exactly how privacy coins could benefit humanity and how they could take back their ability to monitor people’s spending habits.

The Need To Transact To Live In Freedom

What do you need to actually pursue your freedom rights? When you think about it there is just one answer: money.

This is especially true when it comes to activities like exercising your freedom of speech, which might require creating a website, booking advertisements, and hiring graphic designers. Similarly, freedom of assembly often entails paying for transportation, accommodations, and other related expenses. Without adequate financial resources, your freedom rights can be severely restricted.

As society moves further in the direction of CBDCs, digital IDs, and social scores, it is clear that exercising these rights will become increasingly challenging. If private payment options disappear and certain transactions negatively impact your social score, you could lose access to critical venues, websites, and platforms, making it impossible to enjoy true freedom.

In recent decades, cash has already been on the decline as a payment option. With the attempt to introduce CBDCs worldwide, we are seeing the final step towards a largely cashless society — and that should scare people.

Financial Privacy is a Fundamental Human Right

Financial privacy is essential when it comes to exercising basic fundamental human rights. The fears that privacy coins are and could be used for illicit activities are overblown, as traditional systems have long been used for such activities without facing any consequences.

However, governments, regulators & co. won’t stop to try and paint a different picture. To criminalise those who work on privacy-related projects and also those who use them. We have to take a stand together, otherwise we just give them full control in the years to come, facing a future with no private money, but rather a world full of CBDCs. A world in which all your transactions are monitored and eventually evaluated.

At Navcoin, we do not want to live in a world like this, which is the reason for us to build alternatives in the form of privacy-technology that allows to use an anonymous means of payment (xNAV) and the ability to anonymize tokens and NFTs from pseudonymous blockchains.

If you are interested to be part of the countermovement, you should join our Discord and follow us on Twitter.