Crypto: To Ban Or Not To Ban?(XCII)
KYCed Crypto Makes Anonymity, Money Laundering, Tax Evasion Impossible, Why Then Ban & Lose On The Trillion Dollar Blockchain Revolution? Debunking the myth.
All regulatory negativism across the world regarding crypto assets is essentially based on three biggest myths:
Myth-I: Transaction Anonymity
Actually this is the single biggest myth. Even the so called high profiled blockchain / crypto gurus, experts, consultants are laid up with the notion that all crypto transactions are inherently anonymous. On the contrary, except a few especially designed coins, all of the 2,000+ cryptos out there are inherently transparent.
Blockchain ledgers are totally public and transparent to a level that each transaction is universally visible and identified via the transacting parties’ encrypted public keys. In case of bitcoin, transactions are anonymous only because the bitcoin public keys do not identify the account owner by name. Each and every bitcoin transaction since generation of the genesis block is publicly available for anyone to review. The only problem is that those transactions are identified only by the account owners’ encrypted public keys and not by their publicly identifiable IDs, giving the transaction public anonymity. Once the owner of the public key completes KYC (Know Your Customer) , their public key is linked to their ID making each transaction visible to the regulators. Factually, KYC is the first step in any financial relationship that a user establishes with any of the known legacy systems. Obviously it will be the first step in creating a cryptocurrency wallet in any regulated cryptocurrency system. Even by today’s state-of-the-art, when biometric authentication is already becoming so pervasive that by the time a government regulates cryptocurrencies, almost all of us would already be KYCed by default.
Just because total anonymity is a default feature of first generation blockchain (bitcoin), does that mean it is technologically impossible to let the cryptocurrency issuer incorporate KYC as a wallet creating condition?
As a matter of fact, our own ongoing KYC development performs better than any centralized legacy system approaches, by balancing the paradox of full regulatory accountability on one hand with public anonymity on the other.
The other two myths basically piggyback on the first.
Myth-II: Money Laundering
Assuming that the decentralized nature of cryptocurency transaction handling that enables users to remain anonymous and allows for permissionless access, makes KYC and AML(“anti-money laundering”) regulations impossible, is too short sighted. To conclude that blockchain can never evolve to a level of intelligence when the public keys can be linked to customers’ KYC is grossly flawed.
In fact blockchain ledgers are even better than legacy KYC systems as they can alert suspicious transactions in real time. As such, contrary to the common belief, KYCed cryptocurencies are much stronger deterrent against money laundering.
Myth-III: Tax Evasion
Our current legacy system offers plenty of room for tax evaders to evade tax. KYCed cryptocurrency transactions can be tracked in real time making it impossible to evade tax. China is a good example wherein all cryptocurrency transactions are taxed at 5% flat rate thus capitalizing on cryptocurrency boom.
In conclusion decentralized money is a more effective approach than our current resource-intensive and often circumventable fiat money based AML and tax regulations.
KYCed Cryptos Are Neither Anonymous, Nor Money Laundering Or Tax Evasion Vehicles, Then Why Ban & Lose On The Trillion Dollar Blockchain Opportunity Of The Century?
Can India Afford To Miss The Trillion Dollar Revolution?
Recently India’s impending ban on cryptocurrencies was widely reported in media. If India’s crypto negativism is based on those three myths, we now know how baseless and unfounded they are. Not only unfounded, but it is grossly counterproductive to India’s ambitions to become global superpower.
India’s gradual emergence into top 10 global economic powerhouses was entirely based on its contribution to the resurgence of knowledge economy in 80s and 90s. Blockchain technology is predicted to create more than $3.1 trillion of business by 2030 (“How to Position Blockchain Platforms to Increase Adoption” -Gartner).
The Crypto / Blockchain revolution is another blessing that can shape India’s lead in shaping Knowledge Economy 2.0. It is much bigger than anything the world has ever seen before. And, most importantly, it is India’s best chance for challenging US and China as economic super power.
The Super Myth: Blockchain Is Good, Crypto Is Bad
Cryptocurrency is an integral part of blockchain. It is the primary fuel that powers the essential elements of blockchain database that decentralizes it and makes it immutable and robust. Without cryptocurrency the ledger system will hardly qualify as a blockchain, and will become an expensive and glorified database no better than the legacy systems.
Blockchain sans cryptocurrency can never reach the trillion dollar potential that Gartner and other experts are projecting.
Powering The Economy To Eradicate Poverty
We have published a series of articles on blockchain’s crucial role in alleviating poverty and promoting wealth equality. It cannot do it without cryptocurrency powering its wealth redistribution engine.
Once regulators are convinced that regulating crypto, rather than completely banning it is the only way out, only then the real multi-trillion world changing potential of blockchain technology will be realized.
Appreciate some upvotes if you find the article useful. First published in Medium
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