Secret Service Official Urges Congress To Take Action Against Privacy-Focused Cryptocurrenciesbr>
Robert Novy, deputy assistant director for the US Service’s Office of Investigations, has asked Congress to take action against privacy-focused cryptocurrencies.
Speaking before the US House of Representatives Committee on Financial Services Subcommittee on Terrorism and Illicit Finance, Novy urged legislators to “consider additional legislative or regulatory actions” in order to curb the usage of privacy coins.
“We should also consider additional legislative or regulatory actions to address potential challenges related to anonymity-enhanced cryptocurrencies, services intended to obscure transactions on blockchains (i.e. cryptocurrency tumblers or mixers) and cryptocurrency mining pools,” Novy said “Some businesses, including providers of information and communications systems, are taking actions that impede timely access to digital evidence. As such, continued Congressional attention is warranted to ensure law enforcement agencies maintain lawful access to critical sources of evidence, regardless of where, or in what form, that information is stored.”
Novy added that the recently enacted CLOUD Act, a federal law that modernized data privacy and government surveillance laws to reflect industry cloud computing practices, was an important step in this regard, but further regulatory action may be needed, as case law and business practices continue to develop.
“Such legislative or regulatory actions could take the form of new reporting requirements or data collection, retention, and accessibility requirements for certain businesses or business activities,” Novy said.
While Novy didn’t mention any specific privacy-centric cryptocurrencies, the most prominent anonymous cryptocurrencies are Monero and Zcash. Monero features Ring CT for anonymous transactions and has attracted illicit use by people interested in evading law enforcement. Zcash uses a zk-SNARK protocol which utilizes zero knowledge proofs to achieve ultimate anonymity.
Greg Nevano, an official in the investigations division of the Immigration and Customs Enforcement, backed up Novy’s opinion, saying that some newer cryptocurrencies have features that make tracing them quite complicated.
“These new anonymity-enhanced cryptocurrencies are clearly ripe for illicit use in an effort to subvert legitimate law enforcement inquiries,” said Nevano. “Although it is more difficult to trace the movement of illicit proceeds using these newer anonymity-enhanced cryptocurrencies, it is not impossible.”
Novy said that while cryptocurrencies have the potential to enhance US economic competitiveness and support more efficient and transparent global commerce, they continue to be used to facilitate illicit activity. He said that they are committed to continuing to effectively execute their mission and dismantle criminal groups that use these instruments for fraudulent activity or money laundering.
“Those that seek to further their illicit activities through use of digital currencies should have no illusions that they are beyond the reach of the law,” Novy said. “As the investigative work of the Secret Service and our law enforcement partners continues to demonstrate, we are relentless in enforcing the law and will not be stopped by the perceived anonymity of the Internet or digital currencies.”