The chief executive of Coinbase says a number of relatively new crypto assets are poised to challenge the existing financial system using a feature that’s been falsely attributed to Bitcoin (BTC).
In an article penned for Project Syndicate, Brian Armstrong explores the power and controversy surrounding privacy coins, which feature protocols designed to make transactions truly untraceable.
The Bitcoin blockchain, in contrast, leaves a digital trail of transactions, despite misconceptions to the contrary.
Armstrong says privacy coins like Zcash and Monero, although controversial, hold the promise of creating a far more secure financial system that can protect consumers’ sensitive data.
“This shift is a bit like when websites moved from HTTP to HTTPS as the global standard: it lets consumers know that their information is protected by default…
Unsurprisingly, these innovations have alarmed banks, regulators, and law-enforcement agencies. But just as the early Internet needed encryption to enable digital commerce, cryptocurrencies need privacy protections to unlock their full power and potential. Whether one needs to guard against authoritarian regimes, data harvesters, or criminals, the best way to ensure that sensitive financial data isn’t hacked is to avoid having to collect it in the first place.”
In addition, Armstrong says increased access to non-custodial cryptocurrency wallets, which allow users to store their private keys for moving funds, instead of relying on a third party, will increasingly change the norm.
Even with the advent of privacy coins, Armstrong says law enforcement and regulators will continue to have a wide range of powerful tools at their disposal to maintain financial order. He cites the ability of governments to subpoena crypto exchanges and track conversions between fiat and crypto as two “choke points” for enforcement that aren’t going anywhere.