The US Financial Crimes Enforcement Network (FinCEN) will host a workshop this September on how to counter illegal activity encrypted by privacy tech. Crypto is top of the agenda.
FinCEN wants to address zero-knowledge proofs, a privacy-preserving technology used in many cryptocurrencies. One iteration can be found in zk-SNARKs, or "Zero-Knowledge Succinct Non-Interactive Argument of Knowledge." They are used in tokens such as Zcash and privacy-centric technologies like Aztec Protocol, which lets users turn normal cryptocurrencies into private cryptocurrencies.
Encrypted transactions are guaranteed to be legitimate, but don't disclose any information beyond the validity of the transaction. For instance, zk-SNARKs could verify that you’re old enough to drink without disclosing your true age.
The workshop, to be attended by companies building the technology, is part of FinCEN’s monthly “Innovation Hours” program. The goal is for the public and private sector to develop a “mutual understanding” about privacy tech in order to “keep Americans, and our financial system, safe from harm.”
Acting FinCEN director Michael Mosier said that the agency supports “responsible innovation”; it intends to balance transparency and accountability “with the important principles of privacy and security.”
Founder and CEO of privacy coin Iron Fish, Elena Nadolinksi, said privacy is a privilege worth keeping at this year’s Ethereal Summit.
FinCEN and crypto
In addition to this workshop, FinCEN announced last year that it planned to establish a Foreign Bank Account Report (FBAR) for cryptocurrency accounts this year. FinCEN requires anyone holding foreign assets held by a foreign financial institution to submit reports about their holdings.
Currently, FBAR regulations do not capture cryptocurrency accounts, but FinCEN intends to amend this. If FinCEN makes good on its promise, cryptocurrencies will be included as a type of reportable asset to be filed under a Foreign Bank Account Report.