European Observatory to Combat Radicalization – EOCR
How Monero became extremists’ privacy coin of choice
Fastcompany – Monero’s encryption technology, which uses signatures from multiple users to disguise who has made the transaction, has to date not been broken by any country. Analysts with the Counter Extremism Project were used to seeing radical groups asking for donations in crypto currencies. Everyone from neo-Nazis to ISIS sympathizers liked Bitcoin, as it helps avoid oversight from banks and regulators. But in 2020 those with the unenviable job of monitoring hate groups online saw a pro-ISIS group switch its donation preference from Bitcoin to a much smaller and lesser know currency called Monero. Other organizations soon followed; suddenly Islamic extremists and white supremacist groups alike were asking for donations in Monero.
“About a year and a half ago this Monero thing took off, and now it’s pretty widespread,” Hans-Jakob Schindler, the senior director of the Counter Extremism Project, says. When the analysts looked into why, the reason was obvious. Monero is a privacy coin—a form of crypto currency where users on both ends of the transaction remain anonymous. This was a red flag to Schindler and his analysts. They’re not alone in their concerns. The crypto exchange Binance announced it would delist Monero and other privacy coins later this month in at least four European countries because of increased regulations. Earlier this year Dubai banned privacy coins, following the lead of Japan, South Korea, and Australia. They remain legal in the United States.
Crypto currencies like Bitcoin, which has the largest market share in virtual money, show a users’ transactions on the blockchain. But privacy coins like Monero, Zcash, and Dash shield a user’s identity using a variety of methods. Monero—that’s Esperanto for money—is perhaps the most private because it’s default setting is anonymity, while other currencies simply feature anonymity as an option. The company, which is organized as an open source non-profit, did not respond to emails seeking comment. However, proponents of privacy maintain that there are many legitimate reasons for users to prefer anonymity, such as keeping companies from tracking online shopping or to prevent competitors and vendors from seeing how much is being paid for items or services.
While these concerns hardly seem the inspiration to revolutionize the monetary system, at its core privacy coin developers wanted a system free from political interference—a known currency destabilizer. That monetary independence also makes privacy coins especially handy for illegal transactions.Privacy coins in general, and Monero specifically, are also very secure. The company employs ring signature encryption, which uses signatures from multiple users to disguise who has made the transaction. To date, Monero’s encryption technology has not been broken by any country, according to Schindler, leaving regulators blind to who used the funds and for what. When, for example, a Neo-Nazi rapper in Austria known as Mr. Bond was charged with glorifying Nazi ideology (a crime in Austria) and sentenced to 10 years in prison last year, police were unable to access his Monero account as part of the investigation to see if there were illegal transactions related to the case.
It’s not clear how long privacy coins will remain private in the U.S. The Secret Service has recommended Congress regulate them. The Internal Revenue Service offered a $625,000 bounty to anyone who could hack Monero’s privacy protocols.Schindler’s organization does not advocate banning privacy coins outright, but does want the exchanges to hold a customer’s identifying information so that it could be provided to regulators when required by law.“You do need inherent security controls,” Schindler says. “And that will only be possible to build into the system if there is motivation, and the only way to create motivation is for there to be liability and regulation.”
But defenders of privacy balk at government intervention. After all, how is it any different from cash, which provides the most anonymous user experience out there? But cash has built in limitations; it is bulky and hard to transport, especially across national borders (because of regulations). Scott J. Shapiro, a professor of law and philosophy at Yale University, is not convinced more regulation is necessary. Shapiro, the author of the newly released book Fancy Bear Goes Phishing: The Dark History of the Information Age, in Five Extraordinary Hacks, is not a defender of privacy coins, necessarily. He has previously written that opening a cryptocurrency account should require a government issued ID, and said he doesn’t see much value in cryptocurrencies in general “except for criminality.” But when it comes to privacy coins he just thinks their use is too niche and the market for them too thin for them to become widespread.
“Do we even have to regulate this thing that probably will not be that useful?” he wonders. “I don’t think we need to outlaw privacy coins, because not many people are going to be using it.”Except those who do. Today, if you want to donate to the Atomwaffen Division or buy a racist video game where players kill Black Lives Matter protestors, the preferred currency remains Monero.
European Observatory to Combat Radicalization – EOCR
