E-money Good or Bad?

<Forwarded (from: LIBERTY) by Terry Liberty-Parker using timEd.
<Originally from Libernet (Michael Beasley) (1:204/9.0) to All.
<Original dated: Nov 26 '94, 20:51
<From: MWBEASLEY@delphi.com (Michael Beasley)
<To:   Libernet@Dartmouth.EDU
<Date: Sat, 26 Nov 1994 22:56:04 -0500 (EST)

<Suggested Reading: E-Money article in December issue of "Wired"
<magazine

<The article is about the future of electronic money. Electronic
<money is coming, with small scale tests in progress now with
<more scheduled for next year. There are competing systems out
<there - whose ultimate intent is to someday replace entirely
<that green paper in your wallet.
<The really big question is how much individual privacy will be
<retained:

<  "Can digital cash become anonymous, as real-world money is?
<   And if so, should it be?"

<As you can guess there are two opposing camps on this one:

<U.S. Government Agencies AAA .. ZZZ       DigiCash Corporation 
<The American Bankers Association  - vs - assorted cypherpunks
<Microsoft Corporation                 assorted privacy advocates
<The Borg                               at least one Libertarian

                  *******************************
Whoa! Much of content of the discussions I had with Mr. Levy
concerned the importance of protecting privacy and security for
everyone.  None of those comments made the cut.  Yes, I have
concerns about fully anonymous digital cash, but while I am not a
full on crypto-anarchist, neither am I a crypto-facist.

Let me ask you a question.  If people can communicate over the
net anonymously, tranmit unreadable messages, and transfer
unlimited amounts of fully anonymous money, haven't you, in
addition to protecting some of the interests of minorities, also
perfected a mechanism by which people with evil intent can engage
in criminal activities completely unobserved and with no fear of
prosecution?  How safe would you feel as an average private
citizen, a famous/wealthy citizen, a mail order retailer, a bank,
or a leader of a democracy?

I have always believed that people won't come outside to play
with you unless they feel safe.  We want electronic commerce to
work everywhere in the world.

The following is not flamebait!!!  If anyone can adequately
address the concerns of all of the above entities I can guarantee
you that they will become wealthy fast, if you don't address them
all there is a significant risk that you will fail.  If you have
the answer (and I haven't seen an adequate proposal yet) please
let me know and I will spread the word and clear the way.

Thanks for listening!...kawika...
****Speaking only for myself and not the ABA.

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In list.cypherpunks, KDAGUIO@aba.com writes:

> Let me ask you a question.  If people can communicate over the
> net anonymously, tranmit unreadable messages, and transfer
> unlimited amounts of fully anonymous money, haven't you, in
> addition to protecting some of the interests of minorities, also
> perfected a mechanism by which people with evil intent can engage
> in criminal activities completely unobserved and with no fear of
> prosecution?

This has been hashed almost to death before.  The use of crypto does not
remove the fear of prosecution.  It only makes it more difficult to
intercept messages in transit.  Actions at both ends of the transaction
will still be visible to some extent.

We don't have any duty to make law enforcement's job easier, especially
at the cost of our privacy.
- -- 
       Roy M. Silvernail         [ ]  roy@cybrspc.mn.org
                    PGP public key available by mail
     echo /get /pub/pubkey.asc | mail file-request@cybrspc.mn.org
         These are, of course, my opinions (and my machines)

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From: KDAGUIO@aba.com

Welcome to cypherpunks, Mr. Daguio.  Steven's article was unclear (to
me, at least), about just what you do for the ABA.  Could you provide
a more lengthy introduction?

   Whoa! Much of content of the discussions I had with Mr. Levy
   concerned the importance of protecting privacy and security for
   everyone.  None of those comments made the cut.  Yes, I have
   concerns about fully anonymous digital cash, but while I am not a
   full on crypto-anarchist, neither am I a crypto-facist.

There are two senses of the phrase "protecting privacy and security
for everyone".  The first, that I favor, construes the context
strictly, that is, privacy and security with respect to only the
transaction system in question.  The second construes the context
broadly, taking into account anticipations external to the system to
arrive at a judgement of what constitutes protection.  It appears that
you, Mr. Daguio, are much closer to the second than the first; if this
is inaccurate, please correct me.

I believe these two notions of protection are irreconcilable with each
other.  Protection of privacy to me means that only me and my
counterparty know that we have transacted and how much we have
transacted.  Digital cash techniques address the first of these and my
own Remote Auditing protocols can be used for the second.  Note that I
did not say that the bank need know, because both these technique
allow the bank to remain willfully ignorant and yet have an assurance
that they, the bank, are not at risk.  Protection of security means
protection against fraud and assurance of continuity of service.

On the other hand, if we assume that protection of security means that
the populace should be protected against narcoterrorists by denying
them a conduit for funds, then the strong privacy referred to above
cannot b maintained.  Nor even, in fact, can the security be
maintained, as a recent seizure of funds in transit inside New York
indicates.  (Very delicate work; the window of opportunity for the
feds was on the order of an hour, as I recall, and even though they
needed a court order, they hit it.)

I am partial to the first because, at a deep level, it can be stated
exactly what the requirements are, and relatively concisely.  The
second interpretation requires any number of assertions about the
outside world and its chains of causality.  Moreover, the second
interpretation includes a significant amount of discretion by public
officials who are not directly accountable to the public.  Not one of
the executive branch officials in charge of financial matters, however
construed, is elected.  Congress has ceded discretionary authority to
regulators and has largely left the task of interpretation to them.

This discretion with respect to what constitutes security is, to me, a
Very Bad Thing.  At the whim of a department, it may suddenly be
declared that something new is now disapproved of.  The color of law
is used to justify these changes, but they coincide neither in
necessity nor in sufficiency with the law.  To my knowledge, there was
no intensive and large scale investigation into Rostenkowski's
affairs, much less the Clintons's commodities, questionable
activities, if true, certainly constitute bribery.  In a parallel
issue, the FBI is known to have intercepted (legally, mind you) credit
card purchases for grow lights, unquestionably legal even if
associated with one of the least significant forms of drug use.  So
not every illegal thing is followed (not even the most serious) and
legal things are.

   Let me ask you a question.  If people can communicate over the
   net anonymously, tranmit unreadable messages, and transfer
   unlimited amounts of fully anonymous money, haven't you, in
   addition to protecting some of the interests of minorities, also
   perfected a mechanism by which people with evil intent can engage
   in criminal activities completely unobserved and with no fear of
   prosecution?

No, we have not.  What we have perfected (assuming your hypothetical)
is a system where anybody with whatever intent can move money around
with a strong assurance of predictability.  This is manifestly _not_
the same as engaging in criminal activities completely unobserved.  To
pick only the most obvious examples, drug organizations still need to
manufacture and distribute, and these will always remain very tangible
activities.

   I have always believed that people won't come outside to play
   with you unless they feel safe.  We want electronic commerce to
   work everywhere in the world.

Well we want it to work everywhere in the world, too, because that
increases the opportunity for regulatory arbitrage.

A parallel with eurocurrency markets is instructive.  If England
allows an anonymous system and the USA doesn't, then I'll open up a
eurodollar account in England and transact there.  If England doesn't
want to allow the system to operate there, but is willing to hold
dollars for another bank in, say, Hong Kong and Hong Kong allows
anonymous transaction, I use a dollar account there.

In fact it's because of the ability to perform transactions of this
nature at arbitrary points in the globe that anonymous systems will be
very difficult to prevent in the long term.  There will be money in
it, you see, and military protection and fiber optic cable is not
particularly expensive for a national government which wants a new
industry, like, say, India or South Africa or Vietnam.  There's a
distinct possibility that the first country to deploy these systems
will set up a new world financial center, and that's playing for the
big time.

Eric