Dirty Corporations and Financial Surveillance: Coming Soon to a Currency Near You

“Enlightened rulers and good generals who are able to obtain intelligent agents as spies are certain for great achievements.” — Sun Tzu, The Art of War

Journalists working with Edward Snowden came under fire last year under allegations of selling out to corporations and government interests, withholding documents leaked by Snowden that implicated corporations like PayPal in mass surveillance schemes. Critics suggested that Glenn Greenwald and Laura Poitras had been included in a $250 Million business partnership with PayPal’s CEO as hush money to keep damning evidence held by Greenwald and Poitras out of the public eye. Subsequent investigations into these allegations turned up a number of chilling comments made by National Security Agency insiders and experts.

“The NSA has had the cooperation of major financial institutions, including credit card companies, to obtain all financial transactions of these companies’ clients-international and domestic. Further, the NSA not only obtains and stores the financial data of Americans and foreigners, but it also shares them with other government agencies such as the FBI and DEA.” — William Binney, former top NSA official

“For NSA, information from financial institutions such as PayPal is equally if not more valuable and sought after than that obtained from social media and other software companies such as Facebook, Microsoft and Google. […] I wouldn’t doubt the existence of evidence and documents implicating corporations such as PayPal within the large cache obtained by Edward Snowden. The partnership and data collection arrangements have existed for many years.” — Russell Tice, former NSA Intelligence Analyst and Capabilities Operations Officer


Outside critics of government financial surveillance agree:

“Government access to financial transactions has always been top priority for all government agencies, worldwide. Nothing is more important to governments than where the money is, especially money for taxation required to avoid death-stake in the heart of governments. So it is consistent that NSA (and other spies) have access to all on- and off-line financial services providers. As you know, financial services are required to cooperate with their governments, perhaps second only to defense industries, perhaps first due to the need to track worldwide arms sales. Control of arms means control of wealth, and nothing is more appreciated by the few wealthy to offload arms cost to millions of taxpayers.” — John Young, Cryptome.org

You can read more about PayPal surveillance scandal here.

Financial corporations like PayPal have not only been supporting government surveillance of their customer’s finances, but also participating in blockades. In 2011, PayPal froze donations to WikiLeaks under pressure from the federal government. Not long after, they cancelled an account for a Chelsea Manning support fund, before a trial to judge her alleged war crime whistleblowing activities ever took place.


While some corporations take strategic advantage of these surveillance partnerships, others are merely held hostage by hostile governments with expectations of cooperation. In a recent blog post entitled, “Can any software from the United States be safe?” Monetas CTO Chris Odom explained the fears that motivated him to move his company and family from Texas to Switzerland. Odom cites threats to Yahoo CEOs for imprisonment and the coerced shutdown of Lavabit’s encrypted mail service as examples of how companies based in the US are forced to become part of the government’s surveillance apparatus.

As much as Bitcoin shows great promise in returning financial privacy to the consumer, threats to US companies remain a potent risk to Bitcoin’s promise in this realm, given how many important Bitcoin corporations remain under the umbrella of the US government. Coinbase, BitPay, Circle, and Cryptsy — just to name a few — are all US-based companies that collect sensitive financial data about Bitcoin-using consumers. Based on the clear evidence of willing collusion of corporations like PayPal, and the reluctant cooperation of others like Yahoo, consumers should assume that these companies are providing sensitive, privacy-damaging information about their customers to the surveillance state.

It’s up to cypherpunks to create the next generation of privacy friendly solutions to free us from this shadow. We need better anonymity protections in crypto-currency software, and decentralized exchanges to make surveillance less effective and far more expensive. Similarly, it’s up to Bitcoin users to protect their privacy to the best of their abilities by consuming privacy education resources and then practicing these newfound skills.

— Kristov

The Bitcoin Privacy Newsletter contains new posts and Bitcoin privacy tips from Kristov Atlas every week. Sign up and receive discounts on purchases of the Anonymous Bitcoin book.

A Fistful of Bitcoins

Characterizing Payments Among Men with No Names

How much can you learn about Bitcoin users by simply engaging in transactions and data mining the blockchain? Researchers from UC San Diego and and George Mason University answered this question with a seminal paper published in 2013. From the paper:

“[Our goal is] to identify certain idioms of use […] that erode the anonymity of the users who engage in them.”

How were they able to achieve this goal?

“We engaged in 344 transactions with a wide variety of services, including mining pools, wallet services, bank exchanges, non-bank exchanges, vendors, gambling sites, and miscellaneous services.”

The researchers combined information they gleaned from these transactions with public sources of identifying information, such as Blockchain.info’s tagging service and the Bitcoin Talk forums. Armed with this database tying Bitcoin addresses to the names of individuals and businesses, the researchers applied heuristic algorithms to the full list of transactions provided by the blockchain, grouping related addresses together and associating previously unknown Bitcoin addresses with the ones the researchers had already identified.

What did the researchers conclude? The same thing that crypto-currency privacy advocates have been saying for years, now:

“Even our relatively small experiment demonstrates that this approach can shed considerable light on the structure of the Bitcoin economy, how it is used, and those organizations who are party to it.”

Bitcoin privacy is broken, and in desperate need of a fix. I’m sad to report that, although this research was published in late 2013, we still have not seen a software fix for these issues. It’s up to users to educate themselves on the art of obscuring their funds from the world.

If you’d like to learn more about the research, but aren’t attracted to the idea of reading an academic paper, check out this video presentation on the research, filmed at the University College of London on October 17th:

The Bitcoin Privacy Newsletter contains new posts and Bitcoin privacy tips from Kristov Atlas every week.

Interview: The Crypto Show

The Crypto Show has a new vision for liberty minded people these days, crypto-anarchism.  Abandoning the model of “waking up” 51% of the fat-bellied uninterested and distracted public, The Crypto Show crew hope to inspire the smartest 1% to create open-source, distributed systems of resistance to render the state irrelevant through technology and encryption.

Harlan, Ryan, and Martin had me on the show last Sunday to discuss a range of topics including:

  • Why I got into Bitcoin
  • What are my biggest concerns about Bitcoin right now? (Hint: privacy)
  • My book, Anonymous Bitcoin
  • How Bitcoin can help people circumvent unfair capital controls
  • The Ross Ulbricht case and parallel construction
  • Silk Road and the legacy of the Dark Market Transition Economy

Finance cryptography expert Justus Ranvier joins me part-way to discuss why Bitcoin’s network effect is different from social networks, and much more.