Bitcoin: The Decentralization of Privacy Or A Consumer Rights Breach?
Lately, Bitcoin has been getting it from all sides, like a cheap whore when the camera is turned on. Whereas once the concern was that Bitcoin made transacting almost anonymous, the problem, according to PC World, could actually be that Bitcoin is not private enough. PC World writes:
Businesses that accept Bitcoins as payment risk making the transactions publicly traceable, which could get companies in trouble with government regulators, experts say.
The privacy weakness within the digital currency’s payment network was reported on Wednesday by Wired, which found troubling possibilities related to transaction tracking. The problem is in the way the Bitcoin peer-to-peer network works.
Because Bitcoin “associates” senders and recipients of money with an ID number, and all sales are recorded in the Bitcoin public ledger, an entity could pay another company in Bitcoin, then track all payments to that address.
A graph could presumably be developed around that company and the entities with which it does business, finances, spending habits, and so on.
Does Bitcoin Breach Consumer Rights?
“There is a lot of uncertainty today about the scope and sharing of consumer protection responsibilities—and associated liability—for digital and mobile financial services,” said Mark W. Brennan, an attorney at the law firm Hogan Lovells and a member of its global payments team.
The Federal Trade Commission has recommended that companies accepting new financial products and services, like Bitcoin, take responsibility in keeping consumers’ personal data private.
And this is something Bitcoin companies can do, no problem. With additional layers of technology – either available or coming in the future as part of the Bitcoin protocol, such as colored coins – as well as enhanced authentication, end-to-end encryptions and secure storage, making Bitcoin private is easy.
“These Bitcoin developments are a reminder that businesses in the financial services ecosystem should assess their existing data privacy and security practices and other terms and conditions of service to ensure that they are consistent with evolving legal developments,” Brennan said.
One simple way to stay within the purview of law regarding consumer rights is to use a new public facing address for each transaction.
Fundamental Consumer Rights & How Bitcoin Can’t Play Along
In the European Union, a blanket regulatory system has been instituted that gives its citizens certain fundamental rights – like the right to obtain copies of records held about them by companies and institutions. Many proponents believe US citizens should be afforded this right, and the Obama Administration has taken efforts to make this so.
But, the entity of Bitcoin – that is, the protocol – can not be asked for copies of transactions records, even though they exist in the Bitcoin public ledger.
Governments on either side of the Atlantic are fighting over which values privacy the most, except when it comes to expectations of state privilege. Regulators from each side claim “deficits” on the part of the other.
Europe to this day moves forward with a “one-regulation-fits-all-data approach,” as the New York Times called it.
“The ecosystem of the Internet is very delicate,” says Kevin Richards, senior vice president of federal government affairs at TechAmerica, a trade group that represents companies like Google and Microsoft. “It’s not wise to have an overly broad, prescriptive, one-size-fits-all approach that would hinder or undermine the ability of companies to innovate in a global economy.”
European Union member-states have data protection laws already, based on a directive from 1995 that described principles for the collection of personal information. The proposed new rules would standardize data protections across the 27 member states.
Just last month, Jan Philipp Albrecht, a European Parliament representative who reviewed draft legislation proposed additional rights for citizens, like the right not to be subject to consumer profiling.
But, with Bitcoin’s public ledger viewable online, the onus will be 100% on the Bitcoin user to ensure that he or she does not become subject to consumer profiling.
President Barack Obama last year introduced a “Consumer Privacy Bill of Rights” that if passed, would ensure US citizens same base protection as the European rule wishes to reinforce. For instance, the right of access to records that companies hold about them; the right to correct those records; and the right to have limits on the personal data that companies collect and keep.
Although Bitcoin is not incorporated as a traditional business, the unpredictable efforts of regulators to define Bitcoin have opened a space in which what Bitcoin is, in a legal sense, is unclear.
The world will simply have to come to terms with the vector of responsibility. The government cannot protect us from ourselves. That is an unacceptable expectation for any individual to place on another individual or group thereof.
Bitcoin users will remain responsible for ensuring their own privacy. Thus, the result – with Bitcoin’s help – is the decentralization of privacy.
The public ledger, known as the Block Chain, will have to appease regulators as record enough for Bitcoin users. If that is enough, then software can be developed in which a log of transactions based on a certain ID number can be generated and sent as a digital file to an e-mail address.