Money, anonymity and online security: Bitcoin and Monetas

by George Hatjoullis

The creation of Bitcoin is the most interesting development in money economics for some time. Bitcoin is nothing less than cyber-cash and resembles the precious-metal coin based money systems that evolved from the barter economy ( It is produced (or mined) in a decentralised structure and has a finite production (mining) limit. Like paper cash it offers a degree of anonymity but also like paper cash the anonymity is never 100%. Like paper cash it is vulnerable to theft, fraud and other forms of misappropriation.

Anonymity and online security are in part mutually exclusive. If you have cash and someone steals it how do you prove it was yours. If online anonymity is available to all then how do you trace miscreants? How do you prove the Bitcoin was yours? People use safes and safe deposit boxes to retain the anonymity of cash but secure it from theft and users of cyber-cash look to secure wallets. Transparency is a form of security in its own right. It easier to follow the trail of the  thief.

The issue of anonymity also interests the authorities. The motive of the authorities can be sinister in that they might seek transparency to contain political opposition. However, it can also be used to fight crime against property and against the person. Transparency protects against identity theft, tax evasion and the laundering of the proceeds of crime. The authorities will always thus look with suspicion and concern at anyone that devotes great resources towards achieving anonymity. From whom are they hiding?

It is thus of great interest to come across Monetas ( It claims to offer both security and privacy and yet ” is compliant with regulatory requirements worldwide”. Specifically, it offers Know-Your-Client functionality but also the capacity to trade in jurisdictionless currencies and financial markets. One cannot judge this open-source platform until it materializes but it seems to be all things to all people.

It may indeed succeed in being all things to all people. The platform will offer KYC functionality. In other words, you can conform to KYC regulations but the platform will not force you to do so. By implication it will also allow users to function anonymously and not ask with whom they are transacting. Security will be achieved by online ‘safes’ in the form of “theft-proof wallet, unforgeable transactions, [and] secure architecture”. The question that arises is this really compliant with regulatory requirements worldwide?

If Monetas succeeds in providing a secure platform for trading anonymously in a jurisdictionless online currency or cyber-cash it will undermine the efforts of the Financial Action Task Force (FATF) and the associated bodies to fight fraud and money laundering. The mere existence of jurisdictionless cash is a threat to efforts of the FATF. This has been the subject of previous blogs (on Bitcoin) but still remains an issue. By facilitating secure trading in jurisdictionless cyber cash Monetas may find itself in breach of the law of some jurisdictions. The claim that the platform will be compliant with regulatory requirements world-wide thus remains to be seen and may not be wholly consistent with its take up as a platform of choice.