Cryptocurrency & private payments



Whenever you hear reference to cryptocurrency such as Bitcoin and Ethereum these days it seems to be exclusively about price fluctuations and their value as an investment.  This isn’t necessarily bad or unusual as the same headlines, uses, and debates take place with fiat currency.  However, with cryptocurrency this wasn’t always the case, in their earlier years the attention and promises were quite different.

This article will briefly define cryptocurrency and the technology behind it while giving a historical account of its changing focus, or rather changing utility.  We’ll finish with where it sits with respect to private transactions and what other options there are including a How-To Guide!

Before we get into it, we just wanted to say that this article isn’t intended to be a criticism of cryptocurrency.  The cryptocurrency community is very passionate, and our intention isn’t to attack cryptocurrency but rather report where it sits strictly through the lens of privacy – which is our focus. 


The information contained in this article is of a general nature only.  It is NOT financial or investment advice of any sort, do not make any investment or financial decisions about cryptocurrency or the ways you transact on the basis of the information in this article.  Seek professional financial advice before making financial or investment decisions on any matters discussed in this article. 

A brief definition of cryptocurrency and blockchain

Cryptocurrency is a form of digital money different from the ‘normal’ money you have in the bank which you can also transact with digitally.  To define cryptocurrency and contrast it from your usual definition of currency we’ve put together this list:

  • It is secured by cryptography which means counterfeit is almost impossible
  • It operates on decentralised networks based on blockchain technology (defined next)
  • Cryptocurrencies are not usually issued by a central bank, aligned to a gold (or other) standard, or have physical notes or coins
  • Cryptocurrency exists as a unique address of multiple letters and numbers
  • It removes risks associated with traditional fiat currencies such as inflation and government interference with monetary policy

Blockchain refers to a digital ledger that cryptocurrencies use to validate transactions.  Transactions are recorded in so called ‘blocks’ which link together on a ‘chain’ as each block is filled with data.  Consider a physical journal you may have kept when you were younger to illustrate this in your mind.  Each page you write down your thoughts on is the block, the binder is the chain, and so the entire journal is the blockchain. 

Blockchain technology ensures the integrity of transaction data by ensuring no single entity has control over it.  Bitcoin for example operates on a decentralised blockchain which means all transaction data is permanent and publicly visible.  Because blockchain makes it almost impossible to alter or hack recorded data it has other promising uses outside of cryptocurrency, but we won’t jump into those here. 

Cryptocurrency was supposed to be about the privacy!

The headline may not be entirely fair, who are we to say what cryptocurrency was ‘supposed to’ be all about, it’s just that it was a prominent selling point of cryptocurrency in the early days.  When cryptocurrencies announced themselves to the then uninterested general public, they did so under the backdrop of the 2008 financial crisis.  The timing was impeccable as trust in financial institutions was about as low as the value of one Bitcoin in the years to follow (7 cents in 2010).  During those following years Bitcoin needed to be transacted to build the trust and legitimacy needed for mass adoption.  It did so quietly until late 2017 when it experienced its first big spike in value leading to the attention it’s received over the years since and the development of other cryptocurrencies. 

At roughly the same time people were complaining about the lack of privacy in transactions partially thanks to online advertising.  For example, someone purchased a doghouse or kennel from an online store and only minutes later jumped on their social media only to be met with ads for other dog products.  This isn’t as offensive or disturbing to the general public as much anymore, the acquiescence when it comes to being tracked around the internet is now the butt of jokes rather than a serious concern (for most).  However, it should be a concern to people as it fundamentally changes the level of snooping or lack of privacy at an institutional level considered acceptableSocial media companies, big ad-tech, and financial institutions have more insight into your hobbies, interests, and purchases than ever before allowing them (their AI actually) to profile you and sometimes lead to some unfair conclusions

Financial Surveillance is growing with banks assessing your candidacy for loans based on even your smallest spending habits.  Regular deposits to online gambling accounts, use of so called ‘Buy Now, Pay Later’ services, and even above average spend on food delivery can negatively impact your ability to secure a home loan. 

Cryptocurrency was thought to be the answer to these big institutions not seeing all of your various transactions or what you like spending your money on.  So, by purchasing the aforementioned doghouse with cryptocurrency, portions of this type of tracking were to become eliminated.  However, serving private transactions wasn’t the main direction cryptocurrency went in the following years. 

This shiny new technology is now seen as an investment asset rather than a genuine form of alternate payment.  If you asked the majority of cryptocurrency holders about why they bought whatever cryptocurrency they own, the belief in raising value is usually the top one or two reasons.  Yes, there are those who do maintain a belief in the early advertised advantages of cryptocurrency, namely due to their scepticism of fiat currency.  But as a genuine payment option to service privacy and combat financial surveillance, you’ll likely be looking further down their list.  We’d go so far and suggest that if cryptocurrencies didn’t explode in value through regular spikes and just grew modestly over time then their popularity would be a fraction of what it is today.

The volatility in the value of cryptocurrencies such as Bitcoin or Dogecoin make it harder to argue for their acceptance as a genuine form of alternate payment.  What motivation do small and medium businesses have to accept a currency which may devalue significantly by the end of their trading day?  Furthermore, many cryptocurrencies have a limit – Bitcoin’s is 21 million for example.  So, with an already large and growing proportion of people holding Bitcoin long term as an investment the opportunity for widespread use is limited.  As is stands most people who buy it, aren’t spending it.  

Cryptocurrency today

With much of the focus on cryptocurrency as an investment, what about the privacy features that were promised?  Well, unfortunately they fell by the wayside too and full anonymity is unlikely to be guaranteed by any mainstream cryptocurrency these days as the majority of blockchain transactions are recorded on a public ledger.  Certain methods and new privacy-focused coins do exist, but the methods require a higher degree of technical expertise, and the privacy-focused coins aren’t as widely accepted as the better-known ones. 

To own cryptocurrency, you will need to open an account with a cryptocurrency exchange which requires personal information to open.  The ability of law enforcement to track cryptocurrency transactions varies by jurisdiction but are typically attached to traditional laws and powers used to track suspicious financial transactions and fight money laundering and tax evasion.  In late 2019 CipherTrace reported its software can track up to 87% of the worlds top 100 cryptocurrencies (by trading volume as of October 7, 2019).  Indeed, the diminishing privacy features of cryptocurrency transacting continue to be exemplified, here are three examples for further reading:

The cryptocurrency exchanges play an important role in the tracking of cryptocurrency as they have to conform to financial regulations just like any other bank or foreign currency provider.  In a way cryptocurrency has become a victim of its own success – law enforcement and tax authorities are now more likely to target people with large cryptocurrency holdings or transactions.

Indeed, the Australian Tax Office (ATO) will be reminding approx. 300,000 Australian taxpayers with cryptocurrency assets to report their capital gains or losses as part of their 2021 tax returns.  The ATO utilises data matching with cryptocurrency exchanges, banks, and other financial institutions to identify the interactions taxpayers have with these parties and cross-reference that information against their tax returns.  Failing to report cryptocurrency assets and take action when reminded can result in audits and even penalties

To take it a step further China recently banned foreign cryptocurrencies in favour of creating their own – the digital yuan.  True to form the CCP will exploit the nature of blockchain to tighten its surveillance and dataveillance powers.  It would be expected a digital yuan would be fully regulated by the CCP allowing authorities to:

  • See every single transaction of every single citizen
  • See the accumulated wealth of every single citizen
  • Give the CCP more control over the economy allowing them to influence spending behaviour and even put expiry dates on the cryptocurrency
  • Give the CCP greater control over their citizens by linking citizens’ spending habits and preferences to their social credit score.  Citizens deemed not conforming to idealised CCP behaviour may be punished, labelled as threats or political dissenters. 

For now, cryptocurrency isn’t the solution to transacting privately, contrary to early claims.

The options for private transactions (in person)

One of the best solutions to transact privately, away from the snooping eyes of your bank and other third parties is returning to cash where possible.  We’ve recently been conditioned to accept that cash is inconvenient, dirty (a label given to it during the COVID-19 pandemic), and a domain of illegal activity (such as tax avoidance by paying ‘cash in hand’).  Granted it may not be as powerful as it used to be – particularly given businesses increasingly move to online only stores instead of bricks and mortar outlets.  However, don’t forget this is how we transacted for centuries before credit cards and electronic payment options came along and it remains legal tender

There is nothing wrong with going to the bank and withdrawing a few hundred dollars every week to cover your groceries, fuel, and other miscellaneous purchases you wish to keep private.  However, remember that the involvement of a loyalty program or emailed receipt on a cash payment still records data about that transaction and links it to you (just not with the bank).  Everything has to be ‘old school’ to keep a transaction truly private these days – cash payment, physical receipt, no loyalty program.  Even this option is under scrutiny now with many countries placing limits on cash transactions without disclosure, however for the average person, these limits are unlikely to be relevant. 

Another reason for everyone to hold on to cash as a regular payment method and resist its elimination is the other options are all digital.  Theoretically it is possible for you to be locked out of all digital payment methods which are linked to your identity.  This could leave you with no way to access your existing money, pay for goods and services, or be paid.  We knocked on this door earlier when discussing the digital yuan and it speaks to the importance of holding some tangible wealth (such as cash or gold) securely because it isn’t in the form of an IOU from a third party.  In times of crisis (such as war or severe economic recession) history has shown getting access to your wealth held by a third party (bank, safe deposit box, broker etc) can be difficult – lines at banks and ATMs can stretch for miles with no guarantee of supply.  It’s not a bad idea to have some cash and/or gold physically (not on paper as an IOU from a third party) locked away in your secured home safeFor this to work cash must live on so it’s up to us collectively to continue to use it to some degree

For our regulars who read our four-part series on the various types of veillances you may be seeing other dimensions come into play.  For example, let’s assume you want to go to the local adult shop to make a private purchase and so you decide to pay in cash rather than use your card.  Evidence of your purchase may not come from the transaction but could be made from a potential combination of:

  • GPS and/or network data from your modern vehicle, smartphone, or smart watch to geolocate you
  • The surveillance camera network within the store and surrounding buildings
  • Number plate recognition to enter the carpark
  • COVID-19 check-in requirements

Thankfully this infrastructure isn’t currently linked together and accessed by a central party but that’s no reason to breathe a sigh of relief.  Government agencies with warrants could gain access to it all and link it together manually through their law enforcement.  It could be used to prove you were at a certain location buying something typically sold there and it’s not the transaction data that proves it

There really aren’t too many opportunities to make a truly private transaction in person anymore.  The state of affairs is we have to choose which third party we wish to be private from – be it the bank, the outlet’s surveillance system, the company / sellers transaction records, etc.  From the above example you would avoid identification from all four points if you made your purchase online, however you have other third parties to protect from there (see the How-To Guide linked next). 

The options for private transactions (online)

To answer the question immediately (being what’s easily accessible and available today), it’s definitely worth your time to read our How-To Guide on the matter linked below. 

How-To Guide: Shopping & paying online privately

Beyond that cryptocurrency isn’t entirely dead on the matter, there is the growing popularity of so called ‘privacy coins’ we mentioned earlier.  There are various types of these, and the pros and cons can change depending on your jurisdiction so diving deeper would double the length of this article.  Instead, we’ll refer you to this article by Werner Vermaak on Coinmarketcap if you’d like to jump into that. 


It’s a shame that cryptocurrency hasn’t developed to become a mass adopted method of payment to fight financial surveillance by enabling truly private transactions. 

It’s a shame that it has seemingly gone in the opposite direction to what was described when it first came to prominence – privacy isn’t really a legitimate advantage of cryptocurrency anymore. 

It’s a shame that all the hype and all the focus on cryptocurrency isn’t the above but rather its performance as an investment.  It’s now an asset class adopted by the very financial system it was supposed to disrupt.

But beyond cryptocurrency it’s a shame that there isn’t a truly private, easy-to-use, widely accepted means of transacting.  Not to avoid paying tax or to launder money but to protect our privacy regarding what we spend our hard-earned money on and how we get profiled.  All of the various points of snooping by the third parties mentioned in this article cannot be eliminated entirely.  Instead, we have to compromise and choose who we want to keep out and who we accept seeing some degree of our transaction information.  Based on that we have to choose the appropriate means of payment which service our personal privacy priorities rather than our personal privacy in general. 

This article is written in line with our Terms & Conditions and Disclaimer. As such all content is of a general nature only and is not intended as legal, financial, social or professional advice of any sort. Actions, decisions, investments or changes to device settings or personal behaviour as a result of this content is at the users own risk. Privacy Rightfully makes no guarantees of the accuracy, results or outcomes of the content and does not represent the content to be a full and complete solution to any issue discussed. Privacy Rightfully will not be held liable for any actions taken by a user/s as a result of this content. Please consider your own circumstances, conduct further research, assess all risks and engage professional advice where possible.

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