Regardless, it’s important to recognize that anonymity as free speech is not just an empty hypothetical—it’s part of the American legal tradition. In 1956 the Alabama attorney general sued the NAACP for allegedly failing to comply with a statute that required corporations to register with the state. The attorney general claimed that the NAACP had caused “irreparable injury” to the citizens and residents of the state, because it had, among other things, “given financial support and furnished legal assistance to Negro students seeking admission to the state university; and had supported a Negro boycott of the bus lines in Montgomery to compel the seating of passengers without regard to race.”
As part of the lawsuit, Alabama filed a motion to produce many of the NAACP’s records, including its membership lists. While the NAACP produced most of the documents, it refused to hand over its membership lists.
The Supreme Court backed the NAACP, citing the First Amendment. Being associated with this locally unpopular cause could expose members to harm and thus discourage people from engaging in their political activities. Justice John Harlan II wrote for the majority, “Inviolability of privacy in group association may in many circumstances be indispensable to preservation of freedom of association, particularly where a group espouses dissident beliefs.”
Half a century later, dissident beliefs and unpopular groups remain under threat. The First Amendment tends to contract during wartime, and the pressures of the war on terror and the rise of the security state have resulted in bizarre interpretations of free speech under the Patriot Act. Among the many provisions of the Patriot Act, one in particular amended 18 U.S.C. 1960 to penalize “unlicensed money transmitting businesses”—a count included in the Shrem criminal complaint as well as the Liberty Reserve indictment. Years before the government turned its eye on libertarians and bitcoin exchanges, it prosecuted hawala money services—alternative systems of remittance, often used in Middle Eastern communities, that have existed for hundreds of years, long before modern banks or Western Union, let alone bitcoin.
As troubling as the hawala prosecutions should be for proponents of cryptocurrencies, the Liberty Reserve case is more of a reason to worry. Liberty Reserve was a centralized digital payments system—like bitcoin, but with a central operator. The defendants were indicted for money laundering and the operation of an unlicensed money-transmitting service—but the indictment itself focused less on the defendants’ actual conduct, and instead featured a bizarre obsession with the design of Liberty Reserve’s system, which “enabled” “multiple layers of anonymity.”
And as the government turns to both the money laundering and the money transmitting statutes to regulate and penalize entire systems of money transmission, both innovators and political dissidents should take notice.
The WikiLeaks financial blockade was possible because transactions were bottlenecked, with only a handful of institutions making payments to WikiLeaks possible in the first place. The proliferation of cryptocurrency has changed that—but the regulation of exchanges as money service businesses once again threatens to recreate that bottleneck. Additionally, the particulars of the money laundering statute and the requirements for money transmitting service licenses create obligations to verify the identities of customers and actively prevent them from engaging in anonymous, untraceable transactions shielded from government scrutiny.
Money is speech, as Citizens United would have us believe. And as immensely unpopular as that decision is, the court had a point—money is essential to political participation, and restrictions on the use of money in political activities can silence the cause of both the plutocrat and the dissident. Just as money can amplify the voices of the super-wealthy, starving out WikiLeaks with a financial blockade can force it to suspend publishing.
But if money is speech, and free speech can require a certain degree of privacy, even anonymity, particularly so when the speaker supports an unpopular political cause—then why don’t we have a right to anonymous payments?
There are many good reasons to reject that notion—even if the statute is being used in questionable ways, money laundering is still a real problem, and most of us are leery of giving the super-wealthy even easier ways to pour unlimited, anonymous amounts of money into the political system. But in this respect, bitcoin and other cryptocurrencies have hardly introduced a novel dilemma—they have merely forced a 50-year-old question made more complicated by more recent legal history.
As we see an uptick in prosecutions under the money laundering and money transmitting statutes, it is important not to simply dismiss anonymity as the realm of drug dealers and tax evaders. Do we really want to criminalize financial privacy, or the technologies that enable financial privacy? We will be lucky if Charlie Shrem is the last bitcoin startup CEO to be charged by the U.S. government—a hundred times luckier if we can avoid a cryptocurrency-themed redux of Liberty Reserve.
A mask in itself should not be a crime. Giving a man a mask should not be one, either. Yes, anonymity is desired by those whose activities disrupt the state—but sometimes disrupting the state looks like a bus boycott in Montgomery, Ala. There is tangible free speech potential in cryptocurrency, and it should not be easily dismissed.