Bush Security Advisor Warns Against Blockchain Cold War.
The man who helped invent the financial embargoes that cut off terrorist funding after September 11 is concerned that cryptocurrencies could be used to undermine his creations.
This person is known as, Former Deputy Assistant to U.S. President George W. Bush, and a former deputy national security advisor for combating terrorism, Juan Zarate is widely credited with helping create sanctions tools and financial instruments that put pressure on enemies of the state. But as blockchain technology begins to break down borders and empower the unbanked, Zarate is growing concerned it might also be weaponized to illicit ends. This is a personal concept that is not shared by the other experts.
In an interview, Zárate said the following: “There are nefarious actors out there, including state actors like North Korea and Iran that are looking to the use of digital currencies and related technologies, at a minimum as a way of circumventing the current global order which limits their access to capital. But these capabilities and technologies could also be a way for them to try to undermine global financial commercial systems at some point.” These affirmations have the tinge of sincerity, that means that the US, are no longer immune to being attacked by forms different from the weapons that are used by this power, against other peoples.
To be clear, Zarate supports the idea that blockchain and cryptocurrencies could give “greater autonomy” to individuals, while potentially boosting “commercial activity.”
This specialist is now a senior adviser at Washington D.C.-based think tank, Center for Strategic and International Studies (CSIS) and chairman of the Financial Integrity Network, Zarate was also among the technology’s earliest advocates, having been an advisor to U.S. cryptocurrency exchange Coinbase since 2014. Therefore, he knows very well what he says.
Therefore, even so, it is firm that there should be more transparency on how even governments could use blockchain due to the geopolitical nature of the monetary system that could help reimagine the new financial systems.
The key to the success of the tools Zarate created, for example, was the U.S. dollar’s status as the de facto global reserve currency. By creating ways to strategically cut off a nation’s access to the dollar, Zarate was able to effectively restrict their ability to wage war or otherwise undermine U.S. interests. Now the reality is very different with the blockchain technology and they try to see how they can continue with their hegemony.
As you will remember, in his 2013 book, “Treasury’s War: The Unleashing of a New Era of Financial Warfare,” Zarate wrote a detailed account of these tools, but also ended with a stark warning about what he called the “coming financial wars,” in which the tools he helped create might be used against his own country. This is a crude truth that sounds like a boomerang that is returned to its issuer.
Do not forget the following, even though he identifies as a blockchain advocate, in interview, he outlined multiple examples of how state actors are already experimenting with the technology for illicit uses, in the process painting a vivid picture of what could go wrong. For this character, illicit uses is being able to be a user of their own financial resources without the US blocking it.
Therefore, in these times there is talk of evading sanctions. To date, the largest and most real threat of blockchain is its ability to help nation-states evade sanctions, according to Zarate. This is a concern that does not let them sleep peacefully.
At the moment there are examples, a Swedish startup has been granted a business license to build an infrastructure explicitly designed to help countries evade potential sanctions, with the stated goal of giving investors the ability to back “good, hard-working companies and individuals” in Iran.
Most recently, multiple reports by cybersecurity firms indicated that North Korea was amassing a “war-chest” of bitcoin to evade sanctions. Later, a South Korea official formally accused North Korea of stealing cryptocurrency worth “billions of won.” That means that it is already a reality that sanctions can be evaded, according to this confession.
Indeed, Iran’s own temporary sanctions relief has been recently called into question by U.S. President Donald Trump, who last month expanded what are considered strict sanctions against North Korea.
Zarate didn’t comment specifically on the potential impact of such sanctions for the number of startups that have launched and are using blockchain solutions as a way to simplify international investment. This is one more proof that with these technologies it is possible that the US is not immune and imposes sanctions and there are possibilities of evading them.
Even so, he gave a perhaps reassuring tone about what he sees the sanctions and his intentions are possibly wrong.
In this regard, Zárate said: “Actors that are less invested in the global financial commercial system are likely to be more reliant on technologies or techniques that give them asymmetric capabilities to threaten that very system.”
Therefore, there are actions that the government explores. In this sense, Zarate sees a wide range of potential risks. Since much of the success of Zarate’s sanctions tools relied on the influence of the U.S. dollar as a global standard, anything that undermines that influence could undermine the tools.
Simply put, the possible threat is that value from state-backed fiat currencies could be siphoned off into cryptocurrencies that aren’t technically limited by any borders, thereby undermining the issuers’ ability to influence monetary policy. This is a reality that presents itself and hits the hegemony of the dollar.
While the president of the Federal Reserve Bank of Philadelphia has said it is unlikely that cryptocurrency would ever impact that ability, central banks and lawmakers around the world are still exploring or seeking to explore this theory. Some managers have already perceived that new technologies can undermine the traditional financial system, some countries have already changed their policy towards cryptocurrencies.
And though much of that work appears to be benign in nature, other central banks with a history of corruption allegations are also seeking out use cases. Like Russia, Japan, among others.
Of course, these banks may simply explore cryptocurrencies as a way to increase transparency and perhaps expand the trust of the international community. But one, Venezuela, plans to launch an oil-backed cryptocurrency, and it has already come out with the overt objective of circumventing “financial blockades.” This is the news that has them thinking a lot, how to do to avoid the beginning and not serve as an example for others.
Therefore, Zarate said the following, “We have to be very conscious of the fact that there are actors in the system, both state and non-state that may be willing to disrupt that system,” said Zarate. “They may be willing to use new technologies to actually undermine those very systems to affect the U.S. economy and to affect other economies, and frankly, even to profit from it.” There is a great concern in these affirmations, the financial world begins to change.
Responsible adoption. If Zarate has one message then, it’s perhaps a warning about possible unforeseen consequences of the technology. Or that things may be changing for the good of some.
This week, U.S. lawmakers appear to be growing concerned about the possibilities, too, having convened representatives from the U.S. Securities and Exchange Commission (SEC) and the U.S. Commodity Futures Trading Commission (CFTC) to answer questions on the issue in Washington, D.C.
As expected, questions at the event focused on financial stability. And while both the heads of the CFTC and the SEC indicated they see cryptocurrencies as a low risk, they acknowledged this was likely due to the nascent state of the market. What confirms that as the market for these grows, the concern becomes a nuisance for the US.
Zarate draws a similar conclusion, but is perhaps more focused on what happens when that variable changes, and blockchains and cryptocurrencies aren’t so academic anymore. “I’m incredibly optimistic about these technologies, but having witnessed failures in the past of regulation and recognition of risk, and cascading risk, I want to make sure that with adoption comes evaluation of where those risks lie,” said Zarate and concluded:
“And a recognition that we need greater transparency and not less, if we hope for these technologies to take hold.”
In summary, it is a tangible reality that blockchain-bitcoin technology is already causing noise, in the midst of US power, when meetings are held to assess the impact on hegemony until the emergence of disruptive technologies in the block chain. I had the dollar in world trade, there is already worry that is equal to hassle. It waits for new ads.
Disclaimer: This press release is for informational purposes information does not constitute investment advice or an offer to invest. The views expressed in this article are those of the author and do not necessarily represent the views of infocoin, and should not be attributed to, Infocoin.