Bush-era Security Advisor warns of Blockchain Cold War

in #cryptocurrency4 years ago

The key security advisor who masterminded financial embargoes that cut terrorist funding after 9/11 is concerned blockchain technologies may undermine his creations.

Zarate’s background

As a former deputy assistant to President George Bush, Juan Zarate is widely known as the man who created financial instruments to put pressure on enemy states that support terror groups, including being able to cut off a whole nation’s access to the U.S. dollar. With the U.S. dollar being the de facto global reserve currency, a country’s ability to wage war is significantly lessened if it is unable to access the dollar.

However, given the blockchain’s potential to break down borders, circumvent restrictions, and provide banking services to the unbanked, Zarate is concerned cryptocurrencies may be weaponized to illicit ends. It is interesting to note that in his 2013 book, “Treasury’s War: The Unleashing of a New Era of Financial Warfare”, Zarate warned about what he called the “coming financial wars”, in which his creations could be used against his own country.

What Zarate Thinks

Zarate notes that:

"There are nefarious actors out there, including state actors like North Korea and Iran that are looking to the use of digital currencies and related technologies, at a minimum as a way of circumventing the current global order which limits their access to capital. But ‎these capabilities and technologies could also be a way for them to try to undermine global financial commercial systems at some point."

However, it must be noted Zarate is actually an advocate of the blockchain. In fact, he sees potential for it to provide “greater autonomy” for individuals and “boost economic activity”. Being one the earliest advocates, Zarate has acted as an advisor for Coinbase in 2014, now the largest Bitcoin exchange in the US. In addition, he works at a think tank in Washington DC as a senior advisor. However, Zarate is concerned about the need for transparency about how state authorities and the public in general use the blockchain.

Implications for Misuse

As asserted by Zarate, the greatest threat of blockchain is its ability to be used by nation-states to evade sanctions, making it significantly more difficult to wage financial espionage as a means to maintain global order.

He noted that there was already a Swedish startup that was granted a license to help build infrastructure which explicitly assists states to evade sanctions. The startup’s goal was stated to assist Iranian companies by backing “good, hard-working companies and individuals”.

In addition, multiple reports by cybersecurity analysts have shown North Korea being able to amass a sizeable stock of Bitcoin, which they use to evade sanctions. Recently, a South Korean official formally accused North Korea of stealing “billions of won” worth of cryptocurrency.

Responsible Adoption

If Zarate had a key message, it would be to warn against potential unforeseen consequences of blockchain technology.

While the heads of CFTC and SEC indicated they see cryptocurrencies as a low risk, it was acknowledged this was possibly due to the nascent state of the market. Zarate agrees, but is perhaps more focused on what happens when that variable changes, especially given blockchain’s meteoric rise into the mainstream mediascape.

"I'm incredibly optimistic about these technologies, but having witnessed failures in the past of regulation and recognition of risk, and cascading risk, I want to make sure that with adoption comes evaluation of where those risks lie,", he concludes.

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Cool Post. Since you got the bitcoin tag do you have a prediction for Bitcoin over the next few days? Also followed you for future posts :)

This is pretty interesting. A lot of people might not be aware of these cold wars but it just so happens that I mine a coin that was recently attacked by someone with a lot of resources (100k+).

Someone(s) recently attacked Bulwark (which is a privacy coin). They used Nicehash power and successfully forked the network. However the developers were on top of it and managed to squash the forked chain. (https://bulwarkcrypto.com/re-recent-bulwark-blockchain-attack-february-2nd/)

If the devs had of been more passive it could have caused significant damage to the project... I would imagine this type of attack not all devs could deal with either. Hopefully we will be able to develop tools to defend agains this type of overwhelming attack.

Good post. WOW.

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