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Brilliant Ideas on the Cutting Room Floor

AEIdeas

January 27, 2025

The Social Science Research Network (SSRN) is a neat repository for papers from what can be a long history of creating ideas. Most scholars maintain a page there, or their institutions do for them. Oh, how they may suffer from neglect, though! I recently started updating mine after a decade or more of . . . not. So right now my SSRN page is accurate when it says, “I’m currently working on a paper discussing possible techniques for reconciling the tension between privacy and law enforcement/national security in digital currencies.”

How long is that work going to continue? Maybe a while yet. Let me share a dead end.

I’m a lawyer, and we reason through analogy, so if I were trying to design a law enforcement paradigm for digital currency, I might look for a similar environment that already exists. How about transportation!

As they do with financial transactions, people use the roadways for a wide variety of purposes, most good, a few bad. Vehicles get us where we want to go physically (and thus socially, professionally, and so on). Transactions get us where we want to go materially, which supports social, professional, and many other types of goals. Like payments, most travels are local and most have small metaphorical payloads. Some are global, and some have large payloads. Transportation and money transactions are activities broadly engaged in for manifold social and commercial purposes.

So how about something like putting licenses on otherwise private transactions so they can be metaphorically “pulled over” and questioned?

The starting point seems to be a strong disanalogy. Law enforcement access to much of the transportation social graph—the comings and goings of cars and select access to their interiors—is required by physics. . . . Financial transactions do not have the same quality of natural exposure. Transactions denominated in tangible items are nonuniform, so they are resistant to systematic observation, and they are often cloaked, by the walls of houses and stores, for example. As communications events reduced to digital signals, they are hard to observe at creation (like tangible transactions), and they move invisibly and inaudibly along wires and fiber optic cables. When they travel by radio waves, they are cloaked by cryptography. Financial transactions are not like vehicle travels, which everyone can see.

The disanalogies continue:

Tracking of cars is mostly to administer the operation of cars themselves, not to administer the countless uses to which people put their cars. Financial surveillance is not to control threats or dangers that stem from transacting, but from the things that people transact about.

But there’s so much good material!

It wasn’t long after the 1885 invention of the automobile that the world saw the first automobile accident. German inventor Karl Benz—yes, that Benz—drove his Patent-Motorwagen into a wall. Automobiles moved very fast and unpredictably, threatening disruption and injury. They belched smoke and steam, which could spook horses. As these new and dangerous machines made their way into general use, it’s no surprise that authorities quickly sought to bring them under control, including by licensing them.

Too bad all that is irrelevant to financial transactions. And automobile licenses aren’t a privacy-neutral technology anymore.

Today, in an unusual technological twist, the automotive license plate is a gathering threat to liberty. . . . Automatic License Plate Recognition (“ALPR”) technology interprets the alphanumeric characters on the plate and turns it into machine-readable text, recording the latitude and longitude of every vehicle at the moment it captures license plate images. . . . If the automobile were a new invention in the current digital age, we might not institute the same policy of making them easily trackable. Privacy advocates would yowl, as they would if there were calls to make the wearing of nametags a requirement of walking on public sidewalks.

Writing is thinking, I’m fond of saying, so, before casting it aside, I wrote out my arrival at, well, essentially nowhere.

If we are to make digital financial services information amenable to law enforcement use, we should have in mind that it is a deviation from the natural state of things. Financial transactions are not naturally part of a publicly accessible social graph. Getting this naturally private information into law enforcement hands should follow the rules that apply to the privacy-security balance. Any tracking requirement imposed broadly on financial services is a deviation from what is literally natural. Experience with automobile licensing does not support having broadly engaged-in activities made subject to monitoring generally.

Learn more: Restoring the Lost Law of Eavesdropping | A Terrible, Awful, Disgusting Lawsuit Against Apple | America’s Two Singaporean Futures Under President Trump | Privacy and Property Smackdown