3 min read

Just let people transact

Recently, MEPs from the Economic and Monetary Affairs and, incredibly, the Civil Liberties committees, approved a 'wishlist' version of AML and anti-terrorism rules that they believe (near unanimously) should also apply to cryptocurrencies. This is one of the steps ahead of this proposal being enacted into European law. Some of the highlights include

  • Mandatory identity verification for all crypto-asset handlers, including decentralized protocols
  • A 1,000 EUR cap on unidentified crypto payments for goods and services, with the real value likely to decrease due to inflation
  • New financial intelligence enforcement units in member states and Brussels

These rules come despite the fact that AML and KYC regulations patently do not work to stop what the UN Office on Drugs & Crime refers to as 'illicit financing flows'. In some developing economies, these flows could refer to up to 20% of the annual value of trade with advanced economies. Annual proceeds of crime amount to more than $2tn globally, in spite of innocent people being subjected to constant surveillance and suspicion of guilt. It may shock you to hear that sending PDF scans of passport photos to a bank does very little to prevent criminals from transacting.

Cryptocurrencies are often wrongly perceived as an ideal money laundering tool, despite their inherent transparency. The reason people know that North Korea's Lazarus group is in control of hundreds of thousands of ETH worth of stolen digital assets, is because we can plainly see it on chain. Conversely, it had to take a whistleblower to open the lid on some of the world's most notorious opaque money mixers (Credit Suisse AG), revealing over $100bn squirreled away in ratholes. Credit Suisse was (F to pay respects) ostensibly a very well-regulated bank with Lots Of Top AML Controls™️. It presumably stored a lot of PDFs of its customers in different places, and I'm sure held them for the regulatory-approved minimum holding time for financial data just to be safe.

Regular people have been dulled by KYC to the point of expecting financial cavity inspections for basic everyday transactions. In spite of this acquiescence, I believe the chimera of terrorist financing, criminal proceeds and illicit funding flows is not in fact about making new rules and concentrating more power in the European Commission. Rather, I believe it is about:

  1. Competent public administration enforcing principles to minimize incentives to do crime at the source
  2. Effective targeting of criminals without violating innocent citizens' civil liberties

Liberal democracies should be really hard to manage for administrators, given that they should be placing very strong guardrails on executive overreach to protect fundamental values that people won't or can't defend by themselves. However, modern Western democracies have lost their sense of narrative and its citizens lack an animating purpose, giving way to intense apathy and the ability for frankly mediocre administrators to blunder their way through the European Charter of Fundamental Rights without much consequence.

Whether it's a Cypriot bail-in robbing depositors by another name or confiscating private property from businesses by closing them down to prevent the spread of a virus, Western principles clearly do not do much to stop bureaucrats and administrators from doing quite mediocre jobs. In the former case, the eurozone was patently not better off as a result of the bail-in. In the latter case, millions of people died from the virus in spite of the number of fines issued to citizens for indulging in fundamental civil freedoms.

In the European instance, at a minimum, these new AML proposals would violate a litany of articles from the European Charter of Fundamental Rights  (art. 6 Right to liberty and security, art. 7 Respect for private and family life, art. 8 Protection of personal data, art. 17 Right to property, art. 41 Right to good administration, art. 48 Presumption of innocence and right of defense). To rub salt in the wound, they continue to pass the buck to ordinary, hardworking people, instead of holding accountable the gluttonous bureaucratic state that is paid to look after these issues.

To counter this worrying degradation in Western values, European leaders must reflect on the goals of European integration and envision the society they want to create. Should it be one that enshrines the sovereignty of individual citizens and encourages transactions across borders? Or do they want a vast, centralized surveillance state that views every citizen with suspicion? The vision for the latter is a sad society unmoored from any sense of narrative or purpose, destined to dwindle into a sort of demographic irrelevance as the world euphorically ascends around it.

I don't have the zest or the mental damage to want to contemplate any of these questions as a prospective elected official. I have a simple, smol, brain and in that frame, I honestly would rather people just let people transact.