Vladimir Okhotnikov is an expert in blockchain, a developer of cryptocurrency projects, an influential publicist defending the interests of crypto business.
Vladimir Okhotnikov: Privacy and Transparency as Basis of the Bitcoin
Satoshi Nakomoto proposed a completely unique system of financial settlements with a perfect balance of confidentiality and transparency.
Confidentiality is a necessary feature of any financial system. Most of those who are interested in your accounts would like something from you. The state with its tax services, various types of intruders, corporations, banks want to know the status of your accounts.
Only recently, there was such a thing as “bank secrecy”. It was one of the drivers of the development of the banking system and the entire fiat economy. You put the money in the bank and you could be sure that the information about it will not go anywhere, except, perhaps, in cases of some crime.
Privacy is one of the basic properties of freedom, both personal and business. You can determine the amount of information disclosed about yourself, about your life, about your business.
“Objectively, blockchain is a versatile technology that can solve many issues. Cryptocurrency is perhaps the most famous application. However, the blockchain is based on an archive that cannot be hacked or altered. We can see every record, but we don’t know who made it. It is total privacy with unprecedented openness. It is the complete opposite of the banking system…”
Vladimir Okhotnikov
And here we can talk about transparency. This applies above all to business. Transparency is about mutual trust and honest mutual control. However, again, it is up to you to determine the degree of transparency. If you want to be completely open, you are welcomed, if you do not want to miss a bit of information about yourself, this is your right. It is your decision alone.
The blockchain proposed by Satoshi Nakamoto is functionally based on both privacy and transparency.
Transparency ensures that “packaged” information is stable and safe, and you, like every user, can see current transactions and the entire transaction archive. It’s as if you’ve seen all the bank transactions with one exception: we do not see all details of the parties. And you can not only see, but also compare the list of transactions with the archive you keep and thus identify attempts of interference and change of information. How does that relate to privacy?
And this is where Nakamoto came up with a really ingenious solution: you can see the size and time of the transaction, you can see the data of the sender’s and recipient’s wallets, but you can’t relate a specific person to the wallet. Both confidentiality and transparency are respected.
Blockchain compared to fiat systems and “bank secrecy” has fundamentally more “deep” privacy. Cashless fiat money is always stored in bank accounts, and the bank has priority access to them. The safety of your money and your personal information depends on the bank’s goodwill. The cryptocurrency account belongs to you and you alone, only you have access to it and only you can manage your funds.
Bitcoin blockchain has another extremely important property: it is decentralized. That is, it does not have a centralized control, and its operation is initially determined by a built-in algorithm. That is why wallets cannot be blocked, confiscated or used without your permission.
Currently blockchain provides maximum freedom of business. However, from the point of view of the authorities, this is an attack on the established order of things. The state takes away the instrument of influence on its own citizens. Resistance was inevitable and took many forms.
China vs Crypto Business
China doesn’t think much about the crypto business. As soon as the residents of the Celestial Empire understood the potential of this new business, they quickly became world leaders in the volume of mining and operations on local exchanges and crypto platforms. Until 2021, half of the new bitcoins were mined in China. However, the authorities felt that the multibillion-dollar business was getting out of control, and without hesitation banned all cryptocurrency transactions. At that time, there were epic images on the Internet: mountains of abandoned mining equipment. The following principle worked: control is more important than profit.
However, China was not going to give up on profits and cryptocurrencies. The Chinese Central Bank is actively working on a “crypto-yuan”, but it is unlikely that it will be a full-fledged cryptocurrency, and it is doubtful that the authorities will give up the opportunity to manage their own currency. This means that the principle of decentralization is violated and “crypto yuan” (and other “state” cryptocurrencies) is more correctly called “digital currency”.
Chinese authorities are quite sympathetic to Hong Kong’s plans to become a “cryptocurrency hub” and do not watch their own cryptocurrency bans too closely. The projects continue to develop, and according to statistics, for example, in May 2023, the Chinese made $90 billion worth of transactions with crypto assets on Binance alone.
This situation only confirms the survivability of blockchain technology.
“When we talk about China’s actions or policy, we cannot think uniquely. It is true that there is a ban, but, in this case, blockchain projects are developing, trading is underway. For China, it was important to eliminate the uncontrolled process, and no one is going to give up promising technology here…”
Vladimir Okhotnikov
Administrative pressure
China’s political opponents have chosen a different way to countering the “free” crypto business. Why engage in open confrontation if you can control and lead the process? Here, authorities have effective instruments of influence, as was clearly demonstrated in 2023.
The main body, acting as a sharp opponent of the crypto business, became the US SEC.
Its head, Gary Gensler announced that he considers all cryptocurrencies except Bitcoin to be securities whose turnover should be coordinated with the SEC. Bitcoin itself has been declared a risky asset that is used for money laundering and terrorist financing.
In parallel, there was a legal attack on the largest crypto companies. The main success was gaining control over the largest crypto exchange Binance. In fact, the authorities are currently able to control the main commercial cryptocurrency flows.
In part, the purpose of tightening control is served by the release of Bitcoin-ETF. Bitcoin from the non-transparent turnover goes to the fully transparent exchange market.
“In fact, there’s nothing surprising about the attack on crypto business. It’s changing the rules of the game so much that it could lead to a re-formatting of the economy and a change of elites. Obviously, this should have met with opposition. Actually, this is what we are witnessing…”
Vladimir Okhotnikov
In parallel with the SEC, the European authorities are tightening their position.
The European Parliament, after months of discussion, proposed changes to the current “cryptocurrency” legislation.
It is proposed to radically change the attitude to anonymity of cryptocurrency transactions.
All Crypto Asset Service Providers (CASP) will now be required to verify clients who have transactions over 1000 Euro. Data on cryptocurrency transactions cease to be confidential, they are accessed by EU financial authorities.
In fact, the same rules apply to crypto-volute as to fiat. Cryptocurrency loses its special independent position.
In the case of European politics, however, it is still not obvious that the technical and legal implementation of new solutions is a complex and lengthy process
Tether makes a choice
It is impossible to perceive crypto business as a community of idealists ready to fight for the ideals of freedom. Nevertheless, the primary concept here is “business”. If cooperation with the state is beneficial, then most crypto-projects will be happy to follow all formal and informal rules. An excellent example is Tether. Stablecoin USDT works as an interface between “classic” cryptocurrencies and fiat. Sometimes it is convenient to use it as a surrogate for the dollar, especially if for some reason it is difficult to use the bank.
And so, Tether officially announces that it will fully implement US sanctions policy and freeze all sanctioned assets.
“Tether has expressed its principled position. Perhaps the blocked wallets belong to very bad people. Perhaps this is the case, but it doesn’t matter, the principle of blocking is important. It completely contradicts the spirit of the blockchain proposed by Satoshi Nakamoto. However, it is Tether’s choice and its right to conduct business as it sees fit. However, I am not sure that in the long run this choice will be right…”
Vladimir Okhotnikov
This in-depth collaboration with the authorities is paying off as Tether’s business enjoys some support, especially in the promotion of the project in Latin America. For example, in Argentina, where inflation is measured in three digits, the USDT is used almost as an official means of payment.
Tightening state policies against cryptocurrencies is practically inevitable. However, blockchain is an extremely stable technology that is able to withstand both legal and technical pressure. The world is changing very quickly, and the final of the confrontation is far from clear. Cryptocurrencies have a good chance to determine the future of the financial system of our civilization
