In what appears to be a knee-jerk reaction to last week’s Paris terrorist attacks, the European Union is planning to crack down on Bitcoin and anonymous payments. Never mind that nothing has been proven about how the terrorists funded their operations. European authorities are obviously intent on not letting a good crisis go to waste. But will crackdowns on Bitcoin and pre-paid cards really do anything to prevent future terrorist attacks?
Let’s just go ahead and put the TL;DR answer here: no, it won’t. The French government already cracked down severely on cash transactions and stepped up monitoring of bank accounts in the aftermath of the Charlie Hebdo massacre earlier this year. The definition of insanity is doing the same thing over and over again and expecting the same results. Why is it that every time the intelligence agencies fail to stymie an actual terrorist plot, they demand more power to spy on people? Why is it that every time these terrorist attacks occur governments demand more power to pry into bank accounts and restrict the use of cash, Bitcoin, or alternative methods of payment? And why is it that every time new terror attacks demonstrate that these restrictive measures lack any effectiveness at combating terrorism, that governments continue to demand (and unfortunately receive) sweeping new powers?
The real reasons for the war on cash have nothing to do with combating terrorism, and everything to do with combating black markets in general. Taxes in Europe are high, especially value-added taxes (VAT), so people naturally try to evade them. By placing more restrictions on cash transactions, Bitcoin, prepaid cards, etc., governments attempt to force people to make payments digitally, through the banking system, and without anonymity, thus making it easier to track who owes taxes. This also allows taxes to be raised even higher in the future without more people being able to use cash transactions and black markets as an escape valve. Just look at the language used, in which government officials urge the EU to “strengthen controls of non-banking payment methods such as electronic/anonymous payments, money remittances, cash-carriers, virtual currencies, transfers of gold or precious metals and pre-paid cards.”
Any benefit to combating terrorist activity is purely tangential and not the main target of these new regulations. This isn’t any different than the Patriot Act, which hasn’t helped at all in combating terrorism, but has been used in drug cases and other more mundane criminal matters. Governments already had a wish list of extra powers they wanted, and the Paris attacks gave them the excuse they needed to ram those through. Terrorists and real criminals will always find a a way around the restrictions government places in their way. When you drive criminal operations further underground, all you do is make it more difficult to track them and stop them. And when you realize that the Paris attackers may have funded their entire operation for as little as 7000 euros, you realize that any new restrictions won’t have any effect on future attacks.
Remember back in grade school when your teacher got hit in the back of the head by a spitball and asked the guilty party to come forward? And when that person didn’t confess, the teacher punished the entire class? That’s what is happening now in the EU. It’s bad enough that Europeans have to worry about being targeted by terrorists, but now these victims are being victimized even further by their own governments. Consumers will face more difficulty in using cash and even in making non-cash purchases of goods over certain arbitrary amounts. Businesses will have to engage in more paperwork and report more information to the government, acting as unpaid agents of the state law enforcement apparatus. That cost for increased regulatory compliance will be passed onto consumers, raising their transaction costs. Life for the citizenry will be increasingly regulated and controlled, while terrorists will continue to operate with impunity. Will Europeans see through the EU’s charade and finally put their collective foot down, or will they continue to allow their governments to strip away their rights?
Image: Zach Copley