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August 22, 2016, 04:51:35 AM |
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Myth of complete anonymity: It is pertinent to mention at the outset that the identity of the parties on a block-chain is not completely anonymous. The block-chain is a public ledger keeping a public account of all transactions which can be used by governments to track unusual and potentially illegal activities. In fact, block-chains are better than traditionally executed contracts which are not so easy to track.
Scholars like C. Smith have pointed out how cryptocurrency-transactions generate sufficient public data accessible by investigators on the blockchain, which connects transactions to sales and ultimately to sellers. Suppose there is an online platform for the sale of drugs, powered by the bitcoin. Buyers, sellers as well as law enforcement agencies can access this website. Granted, the buyers as well as sellers utilize anonymous signatures, but that alone does not allow them to escape recognition. Every transaction on this website shall be authenticated by miners, who are volunteers earning cryptocurrency in exchange for their services. Miners are able to determine the amount each buyer paid to the seller, and this information is publicly accessible on the blockchain. Equipped with this information, law enforcement agencies can work on tracking the IP address of the seller to identify him, and restore law and order. (Im guessing XMR comes into play here?)
State practice: State practice also definitively reveals that blockchains can be surveilled. Australia has a nuanced system in place. The FBI in the US also effectively tracks down perpetrators of illegal activity on the block-chain network, and Ross Ulbrichts arrest for Silk Road, an illegal drug empire built on Bitcoins, is a case in point. The Czech police too has means of tracking perpetrators, as demonstrated by the seizing of Tomá Jiříkovskýs assets, who was suspected of using cryptocurrency to launder money. Recently, the European Cyber-Crime Centre has also taken steps to track and arrest perpetrators of crimes on block-chains, by partnering with Chainanalysis. These examples are a few of many which demonstrate that the block-chain technology can indeed be surveilled upon, and utilised to track perpetrators of crimes.
It is true that the practice of some states such as Bangladesh, Bolivia and Russia lends support to banning of cryptocurrency (and hence, smart contracts) due to its possibility for misuse. However, most electronic systems do present undeniable possibilities for misuse, but that per se is no grounds for refraining from granting them recognition, or declaring them illegal. Technology such as wire transfers, cash withdrawal and deposit facilities are widely used to deal in black money, launder funds and finance terrorism. These activities have been criminalised and states have put tracking and pattern-detection facilities in place, but the banking platforms themselves are not illegal. In fact, these platforms are widely used by the public due to their advantages and convenience of use.
India can follow in the footsteps of countries such as Canada, Hong Kong etc, and legislate to declare activities like money-laundering, financing of terrorism and drug trafficking using block-chains illegal, and put tracking mechanisms in place to fulfil its international obligations. Omri Marian, the eminent cryptocurrency publicist, also emphasises the great innovation potential of cryptocurrency transactions, and provides noteworthy models for regulation.
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