Private Finance & Regulators: About False Assumptions And Legitimate Use Cases
The year is 2022. Bitcoin and Ethereum have finally established themselves and it is safe to say that they are here to stay. However, there is not much left of the original vision of a cryptocurrency from back in Cypherpunk days.
Yet most Bitcoin investors tend to overlook one issue, which is the fact that Bitcoin (BTC) is not anonymous, but only pseudonymous. The same goes for Ethereum (ETH) and any other public, non-private blockchain. This is where privacy coins come in handy, as they enable concealment of the sending and receiving addresses, as well as the amount of coins being sent.
With regulators worldwide pushing for new rulings and law enforcement criminalizing DeFi developers, it is time to go back to the roots in order to create a true, cryptography-based economy. Ecosystems like ours have the goal of enabling everyone to maintain their financial privacy: We call it Private Finance (PriFi), as a counterpart to Decentralized Finance (DeFi) — and yes, we are still very early!
In this article, we take a closer look at false assumptions from regulators, law enforcement and mass media regarding privacy coins, and portray various legit use cases of private finance solutions, which are perfectly legal; including some Navcoin features/use cases that no other project has!
Origins Of The Criticism Regarding Privacy Coins
At its core, the criticism towards privacy coins is always based on certain ‘myths’, with the most popular ones being: ‘They are just used for money laundering! Tax evasion! Financing terrorism!’
At first sight, people might even understand those claims and think of them as valid points in this whole discussion. Because, of course, there is a kernel of truth in those claims. Privacy coins can, of course, be used to launder money or to evade taxes. But no, it is not really happening, as various studies show. Here is the Chainalysis 2022 Crypto Crime Trends Report with a statistic featuring the share of illicit cryptocurrency transactions by year, from 2017 to 2021:
As we can see, the percentage of illicit cryptocurrency transactions went down from 1.42% in 2017 to 0.15% in 2021.
We left out 2019 intentionally, as this year was a special case. Besides the fact that it was a bear market with not much activity going on at all, it was also the year of the PlusToken scam. They got their hands on crypto-assets worth billions and dumped it on different exchanges; these transactions are responsible for the exorbitantly high share in 2019.
0.15% is not a very high score; however, it’s also important to remember this is out of all cryptocurrency transactions. The share of privacy coins only would be even lower, as most illicit transactions were on BTC and ETH.
Money Laundering & Tax Evasion: FIAT Money Still #1
One point that regulators are missing: The fact that FIAT money, the US-Dollar in particular, is still the #1 when it comes to money laundering, tax evasion, and yes, even the financing of terrorism. Let’s take a look at related news from the TradFi sector from the last years:
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.’ Prosecutors were seeking around $45 million in compensation — Source Reuters
A bit earlier, on December 17, 2021, HSBC got 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.’ — Source BBC
This is a list that could be continued for a long time. And while banks can save themselves by paying nine-figure fines, developers of open source protocols like TornadoCash are facing serious jail time. Something is very wrong here, as PriFi users are not all criminals by any means, and because there are legit use cases for privacy coins.
Privacy Coins: Legit Use Cases
Personal Freedom
Each one of us has non-negotiable freedom rights, such as the freedom of speech, religion, assembly, and so on. What do you need to actually pursue those freedom rights? When you think about it, there is just one answer: money!
Starting with the activities that are required for ‘freedom of speech’, such as: creating a website, booking advertisements, and paying graphic designers. ‘Freedom of assembly’: Paying for train tickets to go to a demonstration, booking a hotel room, getting a taxi.
All those are things which cost money. If you are not able to pay for certain goods or services, your freedom rights are being taken away. In times where governments, even of ‘democracies’, are freezing citizens’ assets for participating in a specific demonstration, privacy coins can help to maintain the ability to enforce those freedom rights.
Financial Data Protection
Using privacy coins will also help you protect your financial activity from the eyes of corporations and governments. The global ambitions to set up CBDCs (Central Bank Digital Currencies) make clear that governments are seeking more control and want to gather more data that could be used for all sorts of things.
Personal Security
For wealthy cryptocurrency investors, privacy coins can be a great option to obfuscate their money flows on-chain. However, this is currently not practicable for any amount as the liquidity won’t allow it for huge sums. Hackers who are looking for victims know their ways while using block explorers to trace back transactions and uncover affiliated wallets.
Business Privacy
If a business wants to accept cryptocurrencies as payment but goes with Bitcoin (BTC), it will face some disadvantages when it comes to the privacy of his business transactions. Clients, as well as competitors, can have a look at the business’ financial data, something no business owner wants.
PriFi: Additional Use Cases In The Navcoin Ecosystem
At Navcoin, we want to push things even further. After having developed our own privacy protocol, blsCT, we are aiming to deliver many more features beyond ‘just’ transferring funds anonymously via xNAV. Among those features are custom private tokens and the possibility to mint private NFTs:
Private Tokens
Private tokens will enable you to mint your own private tokens that then work on top of the blsCT protocol. All transactions made with these tokens are as secure and anonymous as regular xNAV transactions.
Those can be arbitrary tokens, but also tokens whose value is linked to an underlying asset/currency such as USD, EUR, or precious metals. Also possible are private tokenized in-game assets, real estate… There are really no limits.
Other blockchains, which are non-private, could gain a big advantage through facilitating the Navcoin ecosystem to give their non-anonymous tokens a fresh privacy-shield.
Private NFTs
NFTs have been the biggest hype in the crypto sector over the past two years and the trend is unlikely to go away, at least for the foreseeable future. For us, it’s not about the hype — it’s simply about promoting the maintenance of financial privacy in the NFT sector as well.
The problem is that most NFTs are mined on public blockchains like Ethereum that offer no protections for anonymized mining or payments. Anyone can examine transactions, find wallets, view assets, and draw conclusions.
On the Navcoin blockchain, you will be able to mint private NFTs. By using the blsCT privacy protocol, the transaction details (sender, receiver) will be obfuscated. The metadata of the NFT will still be public, but it will be impossible to tell who owns the NFT or from which person it was originally sent.
Conclusion: Privacy Coins & PriFi Are Needed For Legit Purposes
Privacy coins are not the devil’s work, as governments and regulators would like to make you believe. They are what cryptocurrencies were usually all about back in the day: a private, anonymous means of payment.
Over the next few years, we are expecting a higher influx of new PriFi users and are looking forward to welcoming lots of them to the Navcoin ecosystem!
Website: https://navcoin.org
Github: https://github.com/navcoin
Medium: https://navcoin.medium.com/
Discord: https://discord.com/invite/y4Vu9jw
Twitter: https://twitter.com/Navcoin
