Federal Judge Uses $10 Million Sanction To Prove Crypto Is Not Anonymous

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The more time that goes by with cryptocurrency, the more firsts we encounter. This latest first is in the case of the unnamed man. In this case, the Justice Department is alleging they used crypto assets to evade sanctions with a sanctioned country. Unfortunately for this individual, the judge, in this case, does not believe in anonymity and intends to prove just how real the ability to track it is, as well as holding his feet to the fire for trying to avoid sanctions.

In an opinion piece for the case, federal judge Zia M. Faruqui gave some terrific insight into the case, and what it means for cryptocurrency going forward. “Yet like Jason Voorhees the myth of virtual currency’s anonymity refuses to die. See Friday the 13th (Paramount Pictures 1980). Appearing to rely on this perceived anonymity, Defendant did not hide the Payments Platform’s illegal activity. Defendant proudly stated the Payments Platform could circumvent US sanctions by facilitating payments via Bitcoin.”

The coin in question here specifically is Bitcoin (BTC), which is the world’s most accepted and widely known form of cryptocurrency. Reportedly, the defendant designed a platform to transfer $10 million in BTC between an account here in the U.S. and a country with sanctions on it. This deliberate evasion of sanctions is a clear violation of the International Emergency Economic Powers Act (IEEPA) to defraud the U.S. This, in turn, also violates several Office of Foreign Assets Control (OFAC) regulations.

Ever since crypto first came into existence in 2009, it has been considered to be an untraceable transaction. For people buying and selling things on the dark/deep web, it was a way to instantly move money for illicit transactions, or even just things you didn’t want others to know about. This kind of secrecy made it attractive for many people, even those who just wanted to ensure they had some money put aside for a rainy day. Given its price point for the first 18 months or so of its existence, this was a great move to keep money set aside.

Now, it has become as widely traded as gold or silver, and in the case of BTC, it is a coin the U.S. government is incredibly interested in. They want to see how the coins move, when, and where they move. As this is all digital and in code, there is a tremendous track for tracing the coins, unless you are using an intermediary to help wash the coins. Many people, even private investors, will do this. Simply just to be certain that they are blissfully unaware of the coin’s origins or what the back story is with how the person they got it from obtained it.

Judge Farqui isn’t too fond of this idea. “The question is no longer whether virtual currency is here to stay (i.e., FUD) but instead whether fiat currency regulations will keep pace with frictionless and transparent payments on the blockchain. [The Office of Foreign Assets Control’s] recent guidance confirmed that ‘sanctions compliance obligations apply equally to transactions involving virtual currencies and those involving traditional fiat currencies.’”

This kind of control and obligations are going to make using cryptocurrency more difficult for most people, and may ultimately keep them away.

For those who just want to casually invest and aren’t too concerned about the government knowing they have money in there, companies like Robinhood are ideal. Trading anonymity for convenience isn’t anything new financially, either. Look at credit cards and debit cards for a great example of that. You see a lot of people using them everywhere, while the transaction is permanently recorded. Because they are easier than walking around with tons of cash, the convenience trumps the loss of anonymity cash provides. Unlike crypto, though, those cards are insured.