The stalemate over digital money

Date:06/05/2000 Author: Todd Boyle

Basic features of reality for accountants are the stalemate over digital money, and how it makes life worse for us.

The FATF is the international organization established 1989 to combat money laundering. Opposing these organizations like FATF or FINCen, have always been a wide and deep libertarian impulse in America and European countries.

The stalemate between governments and digital cash technologies has been a major cause of the failure of Digicash and the decline other leading electronic money schemes during 1997–1999.

Accounting processes have sustained heavy “collateral damage” as a byproduct of these ideological wars over tracability of money. We are condemned to another decade of manual keypunching, working like mules to do things that should be done by computers For example,

* efficient electronic payments to vendors and employees regardless
of what bank they are a customer of.

* reconciling our AP’s and AR’s and our bank balances
with external entities,

* management of inventories between suppliers and customers, etc.

If accountants want to see improvements in our efficiency we should understand the fundamental problem that are holding things back: There is a stalemate between privacy advocates and technologists. Andy Grove said recently, after the privacy problem, everything else is child’s play. Accountants should get involved to make sure that legitimate privacy concerns are protected RIGHT NOW, to clear the decks and make room for progress, and then get these zealots out of the process.

From the viewpoint of small business accountants, privacy not a problem. Privacy is already reasonably well protected, and further protections are before congress. We should now become much more active in the debate over digital money.

Principles of action:

1. Accountants want better automation of daily bookkeeping processes integrated into our software environment as soon as possible. We are not afraid of being laid off and have better things to do with our time than manually processing checks and paper invoices, etc

2. We realize that the efficiencies we need depend upon the establishment of standards for communication between computers and banks, and for business to business (B2B) commerce and communication.

3. We further realize that B2B commerce depends on strong identification and authentication of the real, physical person for formation of any binding contracts (i.e. non-repudiation) over networks. We conclude that true authentication is necessary and long overdue.

4. Accountants realize that some form of digital money is essential to achieve improvements in the software environment. We recognize that vast numbers of people are blocking digital money because of their legitimate concerns for privacy. Accordingly we support digital money with whatever level of encryption is necessary to achieve legitimate privacy objectives.

5. We encourage an open and reasoned debate over what those legitimate objectives may be, and the resolution of that question as soon as possible.

6. However, we believe that existing national and state laws already define a level of protection of privacy which can be used as a guide for software technologists and financial institutions to bring the needed improvements.

7. Accountants oppose the introduction of new technologies which enable the concealment of stolen assets at this time. Advocates for such new technologies are free to discuss their ideas in another forum, but they are blocking progress on our automation problems.

8. Regardless of our political position on money laundering, we realistically observe that political support for the rule of law and the democratic system of legislation in America makes it impossible to implement new technologies that enable untraceable digital cash in the near term, anyway.

9. Accordingly, Accountants reject untraceable digital cash.

10. We call for immediate implementation of standards for digital money and whatever other standards for communication about transactions are required, to improve efficiency of small business accounting processes right now, in 1999.


Get prepared for a real blast of irrational argument from libertarian zealots. Here are some talking points, from the side of reason:

* Thieves exist in large numbers, throughout the world including your own immediate area. Many more potential thieves exist, behind them.

* If thieves could hide the money they stole, there would be substantial increase in frequency and severity of theft. These will include existing types of fraud, employee embezzlement, and white collar theft as well as blatant types of crime and scams that are impractical today, such as kidnapping.

* Reducing traceability of money increases the severity and frequency of collusive crimes. Large-scale political corruption, kickbacks and monopolies in the commercial sector, and a whole range of outright criminal blackmail become harder to prosecute. With anonymous DBC you wouldn’t be able to prove a damned thing.

* The biggest single financial problem I have is mandatory levies — taxes from a whole spectrum of governments who have unlimited taxing power, and fees from utilities, telephone companies and other monopolies). Anonymous DBC will make this much worse by making it even easier to channel cash to politicians. DBC would create a large-scale short circuit between the corporate and government sectors: Anybody could bribe any politician, any tax collector, or other official, and there would simply be no trace.

* Fraud, embezzlement and corruption are in riotous equilibrium. Anonymous DBC reduces pressure on laundering, requiring other measures that hit my civil liberties somewhere else (physical IDs, police, etc. and the tax cost of more cops.)

* Untraceable money obviously reduces tax collections. When the IRS fails to collect from tax dodgers, eventually, I must pay more.

Zealots often seem to have a subconscious belief that anonymous digital money will shrink the government sector. This is a false assumption. The government long ago achieved the power to tax as much as it wants. Our culture or legal system has no natural protection or immunity, because of our values of honesty, responsibility. These values are being mined and depleted by excess taxation, campaign finance abuses and other forms of bad government.

The public sector has stabilized at 30% or 35% of the GNP, which is apparently the maximum the animal can tolerate without falling over dead (people striking, quitting work, and businesses moving overseas.)

Gimmicks like anonymous DBC will certainly not reduce the public sector in our lifetimes. It will require an evolution in individual awareness and behavior.

In mean time, managing the out-of-control government sector is a civic duty, and the preferred way to manage the government is the democratic process, and public discourse and debate such as this newsgroup.

Breaking ranks and disobeying the law breeds further breakdown in obedience of the whole legal framework. There are lots of dumber and more dangerous elements in the population. The system is already *quite* unfair to them. When the super intelligent can steal through high-tech encrypted money schemes, and the wealthy classes can violate their own legal framework, why shouldn’t the thief just come and steal your cars, or rape your daughter, for that matter? Frankly, we need a lawful society, a lot more than we need digital money.

Anonymous cash advocates should be confronted at every public and online forum, and required to provide an explanation or solution to prevent the use of digital money in large-scale financial fraud, political payoffs, government bribes, kidnapping, etc. They conveniently have left that outside their scope, as if such problems should be solved by wiretaps, surveillance, more cops on the streets, or whatever.

Digital money engineers need a coherent argument on this problem. They need measures within the technology itself, to address the need. By advocating new technologies that expand concealment of financial transfers, they have damaged the reputation of legitimate forms of peer-to-peer electronic payments, which are badly needed in the economy.

This is why accountants should talk straight, with our software developers who often don’t have a realistic understanding of the problem of fraud and abuse.

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