It is well know fact that with every new thing created comes new issues tackling many different fields where law is no exception. Although people were skeptical about the cryptocurrencies at the beginning, in past few months huge steps have been made towards adaptation of cryptocurrencies in everyday usage, as one of the examples - Ukraine’s draft paper to remove taxes related to cryptocurrency income.[1] With the rally of adaption comes question - Can we replace fiat currencies with cryptocurrencies without losing one of the crypto fundamentals: Anonymity? The short answer is - It depends, if you want to know the long answer keep on reading.Most concerning issue involving crypto anonymity is financial scams. The most trivial one is Charles Ponzi created ponzi schemes. Ponzi scheme is an investment option where the creator of the scheme offers relatively huge returns in comparison to investment made. Typically operator of the scheme states that the money is coming from trading or business but actually money comes from previous investors.
Picture Nr.1. “payout scheme which payouts double sum of investment”[2]
Such action is illegal by most legislations, but with creation of cryptocurrencies there is a way how people can conduct fraudulent actions like ponzi schemes remaining fully anonymous. Usage of etherum smart contracts is one of the options. Schemes using them are referred as “smart ponzi’s”. Without going into technical details, they allow person to operate ponzi scheme fully anonymous and this is just the tip of the iceberg because there are matrix schemes, market speculations and many more.With inference that fraudulent actions can be performed without any consequences there is a need for solution. As long as operators of scam schemes remain anonymous and cryptocurrencies are not qualified as currencies there is no way to legally punish them. However, in my opinion, there are two ways how to prevent scams from happening:
- Miner voting - miners have permission to vote about returning any transactions from wallet who is suspected for fraud
- Government’s intervention - Every wallet is connected to personal data which is cold stored and accessible only by government.
To conclude, IMHO, there is no way how to solve issues revolving around anonymity and fraud without limiting crypto-anonymity. Feel free to ask questions and raise discussions in comment section, have a nice day!
Refferences:
1) https://news.bitcoin.com/ukraine-drafts-law-exempt-cryptocurrency-income-profits-taxation/
2) https://ftalphaville.ft.com/2017/06/01/2189634/its-not-just-a-ponzi-its-a-smart-ponzi/