Privacy Coins: A Return to Traditional Financial Autonomy

Opinion by: Carter Feldman, CEO of Psy

Key Takeaways

Traditional transactions were private, leaving no trails or records.
Recent changes, like digital banking and credit cards, have led to significant financial surveillance.
Central bank digital currencies (CBDCs) pose risks to personal financial privacy.
The freezing of accounts during protests highlights the need for privacy-focused alternatives.
Privacy coins are often misunderstood, yet they provide essential functionality in promoting financial freedom.

Privacy coins are not radical; surveillance money is

As society navigates the evolution of money, the rise of surveillance in financial transactions prompts a reconsideration of what constitutes privacy in economic activities. Privacy coins, such as Monero and Zcash, offer alternatives that preserve personal freedoms and anonymity in a world increasingly dominated by financial oversight.

The Historical Context of Financial Privacy

For centuries, transactions occurred without any record-keeping. A bronze coin exchanged between a merchant and a customer left no trace of the sale, keeping details like purchases and spending habits away from government scrutiny. Even with the advent of banking systems, transactions were mostly private. When paying for goods with notes from institutions like the Bank of England, there was no requirement for identity verification.

The introduction of paper money in medieval China and early modern Europe served as an anonymous and transferable currency. Ownership changed hands without the need for personal identification, with governments relying on audits and witnesses to track transactions.

However, this paradigm shifted dramatically over the last few decades. The introduction of credit cards in the mid-20th century allowed for the consolidation of spending data into searchable digital records. Laws introduced in the 1970s required banks to verify identities and report unusual transactions, creating a framework for extensive financial surveillance.

The Modern Era of Transactions

The rise of the internet has further transformed financial interactions. Digital banking, mobile payments, and online financial platforms collect not just data on what you buy but also when, where, and how you make purchases. These payment networks often require identity verification and analyze user behaviors in real time, embedding surveillance into financial convenience.

Central banks are now exploring the potential of Central Bank Digital Currencies (CBDCs), which could further enhance government oversight of financial activities. Unlike cash, these digital currencies lack guarantees of privacy from the start. Although some privacy protections might be theoretically included, they often exist alongside a structure designed for visibility and control.

Governments currently have unprecedented access to personal spending histories, with the authority to freeze accounts at their discretion. For instance, during the Freedom Convoy protests in Canada in 2022, authorities froze accounts of participants. Recently, in Georgia, bank accounts tied to organizations supporting protestors were similarly frozen, prompting severe criticisms regarding human rights violations.

The Importance of Privacy-Centric Alternatives

The ability of governments to freeze accounts during political protests underscores the urgent need for alternative monetary systems. Privacy-focused cryptocurrencies, like Monero and Zcash, allow for direct, peer-to-peer exchanges without requiring the same identity verification or centralized control. This digital approach mirrors the privacy once inherent in cash transactions.

Despite their advantages, privacy cryptocurrencies are often misrepresented as tools for illicit activities. This perspective overlooks their broader potential for social utility. Just as cash transactions enable private purchasing, these digital currencies preserve freedoms in a world increasingly characterized by monitoring. In countries with authoritarian governance or unreliable banking systems, private cryptocurrencies can serve as vital mechanisms for securing and transferring value.

Society already accepts cash transactions that respect privacy, and it does not criminalize high-denomination notes due to potential misuse. Therefore, the same principles should apply to privacy-focused digital assets. Instead of being viewed as threats, these forms of currency should be considered modern equivalents of cash—useful, legitimate, and historically consistent.

While crypto may pose challenges to central banking systems, its most significant value lies in safeguarding the type of private exchanges that have existed for centuries, prior to the current era of financial surveillance.

The real anomaly is not the existence of privacy coins, but rather the assumption that every financial transaction should be open to scrutiny, analysis, and potential government interference. Advocating for such privacy is not seeking special privileges; it is about defending long-held norms that have been in place since before the mid-20th century.

When critics label privacy coins as suspicious, they inadvertently suggest that natural commerce is criminal. They view centuries of private transactions as inappropriate while normalizing a recent 70-year trend toward financial oversight. Those supporting the status quo should take a broader historical perspective.

Opinion by: Carter Feldman, CEO of Psy.