Does Obama really want your bitcoins?

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Wednesday 06 May 2015

At the beginning of April, President Obama unexpectedly issued an executive order entitled ‘BLOCKING THE PROPERTY OF CERTAIN PERSONS ENGAGING IN SIGNIFICANT MALICIOUS CYBER-ENABLED ACTIVITIES’. It was so sudden and strange that some critics questioned whether it was an April Fools’ prank on the part of the White House. The significance of the order is that the US government would be able to seize funds used in conjunction with ‘cyber-enabled activities originating from, or directed by persons located, in whole or in substantial part, outside the United States.’ And that includes bitcoin.

Read also: Why is Rand Paul accepting bitcoin donations? [link]

Terrorist

Terrorists be warned: the US wants your bitcoins

Bitcoin and cryptocurrencies are not mentioned in the order itself, and the language in the document is unclear – it is not explained, for example, how the authorities would confiscate crypto holdings. Nevertheless, the crypto community was quick to condemn the order because, amongst other things, it appears to outlaw donations to whistleblowers like Edward Snowden. (These could realistically be classed as funding a terrorist, under the definitions used by the US government.) The news prompted a surge in donations to Edward Snowden’s defence fund, with more than 200 transactions from a few cents to a couple of thousand dollars sent in bitcoins. You can see the money going in and coming out here.

Feel free to make a donation to support the cause, or merely to make a point to the US government, as others have already done.

An unworkable proposal?

One of the first of the donations to Snowden was accompanied by a blockchain message inviting the authorities to come and arrest the donor (his name, state and phone number were included). Realistically, though, it’s almost impossible and politically unpalatable for the government to follow up on donations such as these. For clear-cut cases of terrorism (such as bitcoin being used to fund jihadi groups), it might be worth the trouble, though there are problems associated with identifying the users of a pseudonymous peer-to-peer online currency – assuming they have a reasonable idea of what they’re doing.

The real significance for bitcoin will be the treatment of centralised exchanges and wallet services. If bitcoin funds are identified that pass through these, even without their knowledge or direct involvement, they could find themselves the object of an investigation and their funds frozen or access blocked. KYC and AML processes will no doubt be beefed up, if they haven’t already been made watertight, to avoid such an eventuality.

What this does not spell is doom for bitcoin, or even a major problem. The US is cracking down on cybercrime and the money used to fund it – and that includes cryptocurrency. That shouldn’t come as much of a surprise. It’s part of a wider ambivalence, in both the US and elsewhere, about the opportunities and problems posed by virtual currencies. Twenty years ago different groups of people simultaneously wrung their hands and sung the praises of the internet, as they wondered what it might be used for. It’s a stage that digital currency will have to go through to achieve mainstream usage. In that respect, Obama’s executive order can be seen as little more than growing pains. If, like many others, you don’t like it, there’s always the option of voting with your wallet: 1snowqQP5VmZgU47i5AWwz9fsgHQg94Fa – or donate to the Electronic Frontier Foundation.

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