The Government Fears This Privacy Tool

The Department of Justice indicted the creators of Samourai Wallet, an application that helps people spend their bitcoins anonymously.


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The Department of Justice indicted the creators of an application that helps people spend their bitcoins anonymously. They're accused of "conspiracy to commit money laundering." Why "conspiracy to commit" as opposed to just "money laundering"?

Because they didn't hold anyone else's money or do anything illegal with it. They provided a privacy tool that may have enabled other people to do illegal things with their bitcoin. But that's not a crime, just as selling someone a kitchen knife isn't a crime. The case against the creators of Samourai Wallet is an assault on our civil liberties and First Amendment rights.

What this tool does is offer what's known as a "coinjoin," a method for anonymizing bitcoin transactions by mixing them with other transactions, as the project's founder, Keonne Rodriguez, explained to Reason in 2022: 

"I think the best analogy for it is like smelting gold," he said. "You take your Bitcoin, you add it into [the conjoin protocol] Whirlpool, and Whirlpool smelts it into new pieces that are not associated to the original piece."

Smelting bars of gold would make it harder for the government to track. But if someone eventually uses a piece of that gold for an illegal purchase, should the creator of the smelting furnace go to prison? This is what the government is arguing. 

Cash is the payment technology used most by criminals, but it also happens to be essential for preserving the financial privacy of law-abiding citizens, as Human Rights Foundation chief strategy officer Alex Gladstein told Reason:

"The ATM model, it gives people the option to have freedom money," says Gladstein. "Yes, the government will know all the ins and outs of what flows are coming in and out, but they won't know what you do with it when you leave. And that allows us to preserve the privacy of cash, which I think is essential for a democratic society." 

The government's decision to indict Rodriguez and his partner William Lonergan Hill is also an attack on free speech because all they did was write open-source code and make it widely available. 

"It is an issue of a chilling effect on free speech," attorney Jerry Brito, who heads up the cryptocurrency nonprofit Coin Center, told Reason after the U.S. Treasury went after the creators of another piece of anonymizing software. "So, basically, anybody who is in any way associated with this tool…a neutral tool that can be used for good or for ill, these people are now being basically deplatformed."

Are we willing to trade away our constitutional rights for the promise of security? For many in power, there seems to be no limit to what they want us to trade away.

In the '90s, the FBI tried to ban online encryption because criminals and terrorists might use it to have secret conversations. Had they succeeded, there would be no internet privacy. E-commerce, which relies on securely sending credit card information, might never have existed.

Today, Elizabeth Warren mobilizes her "anti-crypto army" to take down bitcoin by exaggerating its utility to Hamas. The Biden administration tried to permanently record all transactions over $600, and Warren hopes to implement a Central Bank Digital Currency, which would allow the government near-total surveillance of our financial lives.  

Remember when the Canadian government ordered banks to freeze money headed to the trucker protests? Central Bank Digital Currencies would make such efforts far easier.

"We come from first principles here in the global struggle for human rights," says Gladstein. "The most important thing is that it's confiscation resistant and censorship resistant and parallel, and can be done outside of the government's control." 

The most important thing about bitcoin, and money like it, isn't its price. It's the check it places on the government's ability to devalue, censor, and surviel our money. Creators of open-source tools like Samourai Wallet should be celebrated, not threatened with a quarter-century in a federal prison.


Music Credits: "Intercept," by BXBRDVJA via Artlist; "You Need It,' by Moon via Artlist. Photo Credits: Graeme Sloan/Sipa USA/Newscom; Omar Ashtawy/APAImages / Polaris/Newscom; Paul Weaver/Sipa USA/Newscom; Envato Elements; Pexels; Emin Dzhafarov/Kommersant Photo / Polaris/Newscom; Anonymous / Universal Images Group/Newscom.