Business 23 May 2018

Gerald Fenech

Owning cryptos could compromise US contractors’ security clearances: report

Investors or individuals who own cryptocurrencies could be deemed a security risk in the United States, especially if the investor in question holds security clearance or is applying for one to access classified U.S. government information, according to several reports.

In fact, Reuters reported that U.S. bureaucrats are actively deliberating over whether they should single out cryptocurrency investors who have special security clearances to government information. Individuals who own cryptocurrencies like BTC or Ethereum may be deemed risky in the Pentagon’s eyes on grounds that they could sell secrets to enemies with the help of anonymous cryptocurrency transactions, according to the report.

Last February, the Defense Security Services and the Pentagon said that they were working on the guidelines to report cryptocurrency ownership. The debate is still ongoing, according to another report published on May 22, with several government contractors allegedly infuriated amongst a huge backlog of security clearances.

Param Vir Singh, director for Financial Services Innovation at Carnegie Mellon University, believes cryptocurrencies pose security risks, telling Reuters: “There are a lot of good things about cryptocurrencies, but at the same time there are these security risks. Think about a knife: It could be used for good things and it can be used for bad things as well.”

According to an article by Adam Reese, DSS employees are being asked to report their cryptocurrency holdings on the agency’s Standard Form 86. In response to Reese’s article, the Defense Security Service Public Affairs said the agency “has fielded a number of questions from industry as to whether ownership of cryptocurrencies, such as Bitcoin, should be reported by cleared persons or security clearance applicants.”

At the moment, there are no current Department of Defense (DoD) guidelines which relate to the reporting of ownership of cryptocurrencies. The DSS stated that it is working with DoD policy offices for further clarification on the subject and once guidance is issued, it expects to disseminate this position to the industry accordingly.

The status of cryptocurrency owners as a security risk remains a controversial topic with several differing opinions on the matter. Steven Aftergood, of the Federation of American Scientists, stated that holding cryptocurrencies do not necessarily pose a security risk.

“I don’t know if the government has a clear understanding of what makes a person actually a security risk,” Aftergood said, according to the Reuters report. “Instead they look at proxy factors like excessive debt, drug use and contact with the criminal justice system, which don’t necessarily translate to risk.”

The opposite view was expressed by University of California researcher Nicholas Weaver, who strongly disagreed and believes that owners of digital currency should be suspect. “Since Bitcoin’s only real use is to buy drugs, etc., it deserves suspicion,” he stated.

Note: Tokens on the Bitcoin Core (SegWit) chain are referenced as BTC coins; tokens on the Bitcoin Cash ABC chain are referenced as BCH, BCH-ABC or BAB coins.

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