What’s in Your Wallet?

This article originally appeared in Virtual Times.


Unless you’re a criminal, you probably have no need to launder money. Though the act itself is neutral, money laundering almost always points to illegal activity or tax evasion. It’s hard to imagine any other reason why someone would go to the trouble of concealing or disguising the source of their income. An estimated $300 billion is laundered through the US each year, and it’s a safe bet that almost all of those dollars are ill-gotten gains.


Criminals who operate behind closed doors are especially difficult to catch. They keep a close-knit circle of accomplices, and produce little discoverable evidence linking them to criminal activity. One way to sleuth into their dealings is to follow the money trail. To aid authorities in their prosecution, Congress passed the Money Laundering Control Act in 1986, effectively criminalizing the act of disguising the source, ownership, location, or control of money. As a result of anti-money-laundering laws, banks are obligated to file Suspicious Activity Reports (SARs) and make them available to law enforcement agencies. SARs provide a treasure trove of clues that help authorities identify and catch criminals and terrorists. While banks fail to identify some felonious transactions, SARs provide a safeguard against the rampant use of banks to facilitate crime. Cash, on the other hand, is a different animal. It’s relatively easy to keep paper money hidden from the prying eyes of banks, regulators, and authorities. Moving large amounts of cash is not without its logistical challenges, as anyone who’s seen the TV series Breaking Bad can attest, but enterprising criminals are up to the task.


If laundering cash is such a big problem, why not ban paper money? Plenty of financial services exist that are far superior to using cash for transactions. Credit cards, Venmo, and Cash App, to name a few. Even the unbanked have options to transact electronically rather than with a form currency that’s changed little since being invented thousands of years ago. Cash is routinely used among criminals, and a ban would give regulators power to instantly lock down and reverse any financial account that they want to. The affected people literally couldn’t have a dollar to their name.


There is, however, a potential downside to banning cash. A government that takes control of an asset originally controlled by citizens eventually leads to the opposite of a free society. Some would argue that people shouldn’t have anything to worry about if they’re not breaking the law. That’s a bit shortsighted, as new leaders will enter office who might ban things that were formerly lawful, and they’re not going to give back the financial off-switch that they inherited. Because of that, it’s generally a good policy not to allow a government to have too much control over the people.


Aside from a few conspiracy theory articles, there’s no evidence that the government is trying to ban cash…yet. However, there is mounting pressure to kneecap cryptocurrency’s ability to offer the same advantage that cash has. Regulators firmly assert the need to track and scrutinize every transaction in the cryptocurrency ecosystem. They point to state actors like North Korea, a regime that has drained billions of dollars through crypto heists, using their stolen funds for the development of nuclear weapons. Obviously, terrorists and sanctioned entities should be banned from being able to transact in any financial system. How can that be done with crypto? An extreme option would be to follow China’s lead and ban all cryptocurrency. The US Treasury has taken a softer approach. They just want to track everything.


Because of the nature of cryptocurrency, allowing anyone to track transactions would give everyone the same ability. Crypto wallets are viewable on the public blockchain, meaning everyone can see everyone else’s business. Imagine ordering a pizza and giving Domino’s your entire credit card statement along with your payment. Or getting paid by your employer and letting your boss see everywhere that you’ve spent money. With crypto, there’s no need for the famous Capital One slogan, ‘What’s in Your Wallet?’, because everyone already knows.


Privacy is built-in to traditional currency. You can keep money in your wallet or even under your mattress where nobody can see it. Not so with cryptocurrency. A growing number of people are wanting options to keep their crypto wallets private, like a real wallet is. They’re not criminals, they just don’t want everyone to know that they spend money on an embarrassing hobby or contribute to a controversial cause. It’s not radical or sinister to want a little privacy.


To address the public nature of crypto wallets, multiple solutions have been developed that give people a little privacy. Tornado Cash is one such solution, and in August of 2022, all United States citizens were banned from using it because criminals and terrorists were using it. The problem with that rationale is that these same unsavory characters also use other technologies for crime, like email. As a matter of fact, in the 90’s the FBI made a strong push to compromise the security of all cryptography and encryption, which is what keeps email (and the entire Internet) private. They believed that unless you were a criminal, you had no need for robust security. They lost that fight because budding Internet technologies added legitimate reasons for non-criminals to use full encryption. Today, new crypto technologies are adding legitimate reasons for non-criminals to use software like Tornado Cash. Basically, the software “allow[s] a user to deposit tokens from one address and later withdraw those same tokens to a different address.” It works like a bank’s safe deposit box room. Anyone can see who goes in and out, but nobody can see inside the room. A person can enter the room and put cryptocurrency in a box, then go give the key to someone else who can walk in and take the money from that box.


As it turns out, laundering paper money is pretty inefficient. It’s bulky, prone to theft, and there are logistical issues with moving large amounts of funds. The big-time money launderers instead use banks to transfer money electronically. Yes, banks are obligated to file SARs, but “in 2020 alone, global banks were hit with $10.4 billion in fines for money-laundering violations.” That means even though regulators have a mechanism to track money in banks, savvy criminals know how to manipulate the system. By banning software like Tornado Cash, regulators will block law-abiding citizens from keeping their cryptocurrency private, but they won’t stop criminals from doing the same. The solution is never mass surveillance and controlling movements. It’s not very effective in fighting crime, and it strips citizens of privacy and freedom.


The act of money laundering is ethically neutral. The argument against it used to work because there was no legitimate reason to do it — it almost always pointed to illegal activity or tax evasion. With cryptocurrency, there is now a legitimate reason: to achieve the same amount of privacy as cash. The Treasury Department’s move to ban Tornado Cash reflects a deep-rooted problem — thinking it’s in the public interest to surveil everything because criminals exist. If they get all the powers that they want, they’d be able to track and instantly freeze or revoke the funds of any business or person they disagree with. Ultimately this issue goes beyond privacy and into matters of freedom and control. There is no freedom without privacy. Still, it is a matter of national security to catch and stop criminals and terrorists. There’s more than one way to catch a criminal, and the same kinds of brilliant minds that figured out how to incorporate privacy into the blockchain are eagerly tackling the problem of criminal activity. If the government can do anything to help, it would be to put down their ban hammer and devote more resources and energy to developing the next generation of crypto-secure infrastructure.



Jared Leshin is an author, CMO at METADEV, and founder of hypersuade.co — a Web3-immersed creative marketing agency. Read his book, Advertising and the Nature of Reality, available on Amazon.



1 https://www.zippia.com/advice/money-laundering-statistics/

2 https://en.wikipedia.org/wiki/Money_Laundering_Control_Act

3 https://www.buzzfeednews.com/article/jasonleopold/fincen-files-financial-scandal-criminal-networks

4 https://home.treasury.gov/news/press-releases/jy0916

5 https://www.congress.gov/bill/105th-congress/house-bill/1903

6 https://www.coincenter.org/education/advanced-topics/how-does-tornado-cash-work/

7 https://www.zippia.com/advice/money-laundering-statistics/