Is User Data Really Private on a Blockchain?

Within the annual event “Privacy week” which took place from January 23-26 in Belgrade and online, professionals from the civil, private and public sectors tried to answer the question of how private are blockchain data.
Meta Public Policy & Regulatory Affairs Manager Hanane Boujemi, Law Office Karanović rep Rastko Petaković, Law Office Motika rep Milomir Matović and ECD founder and co-owner Aleksandar Matanović discussed the topic.

Reading Time: 6 minutes

blockchain privacy week

Illustration: Milica Mijajlovic

“There is no absolute anonymity” 

Those who are not completely sure how blockchain technology works and those who plan to use some of the cryptocurrency trade systems can be led to believe that financial transactions of this kind are completely anonymous. However, it’s not the case, lawyer Milomir Matović of Motika Law Office explains: 

“People widely believe that blockchain data are anonymous because, when we open some data, we will see a combination of numbers and letters and we believe that, based on that, we cannot reveal who is behind these so-called public keys. However, these data, combined with other data, can lead us to confirm the identity of a person. There are some technological solutions similar to those cryptocurrencies such as Monero or Zcash, where there is a possibility not to reveal the public key, but then we also see that a transaction occurred on these blockchains,” Matović explained. 

On the other hand, lawyer Rastko Petaković of Karanović Law Office underlines that although absolute anonymity does not exist, there is relative anonymity, and, in time, it can be considered as something that can solve many issues we are facing today. 

“Blockchain, by its nature, is not an anonymous technology, it’s not its core principle, it should be trustless technology, namely there is no need to trust the other side but things evolve on their own. Owing to blockchain, solutions can be developed for different issues we are facing today, and which are currently solved with centralized solutions. The fact that it is more complicated to pay BTC than with a card, the fact that you have a lot of knowledge of how to do something, has a positive effect on the mentality of people who are trying to make their data not anonymous, because it is impossible, but not to be centralized. In this way, if someone wanted to collect all your data, it would not be so simple,” Petaković explains. 

„Blockchain is the start of the revolution“ 

Each nation most often has its own regulations. Governments are trying to adjust the existing laws such as the Law on the Prevention of Money Laundering and the Financing of Terrorism to the digital assets sector. That is why we can witness different practices across the globe which additionally make harmonization of international trade with cryptocurrencies more difficult, by the words of Hanane Boujemi, META (MENA and Turkey) Public Policy & Regulatory Affairs Manager: 

“The company I work for is very prominent when it comes to innovations. Governments recognize the future of this technology but still don’t know how to use it so I recognize the division between blockchain and other technologies there, I see individual approaches of interested parties. It would be a good thing to have a homogenous world and that we all agree about the principle, instead of doing everything in fragments,” the panelist added. 

hanane boujemi meta

Screenshot: YouTube/Partners Serbia

She adds that although blockchain is not fully compatible with GDPR’s set of regulations used to regulate privacy issues in the EU, this technology can fulfill conditions related to data privacy in the future. 

“There are several blockchain principles as online technology that are not compatible with GDPR such as keeping user data on blockchain and other criteria. But this does not mean that technology cannot advance, its core principle is good, but this is the opportunity to establish trust between the parties that don’t recognize one another. In addition, a possibility is given to enable the same approach to the global market to everyone and this is the start of something that will revolutionize this area,” Hanane Boujemi believes. 

“GDPR is too little too late“ 

The all-present GDPR tried to “tame” the Internet which has already evolved too much, and users, due to numerous pop-up notifications regarding privacy protection do not pay attention at all to this term. 

“In my opinion, GDPR is too little to late, namely this regulation is too late. In addition, I’m convinced that regulations that refer to third-party cookies have deferred the future of people in terms of privacy very much. It should have helped us but now we have a situation in which many people are not interested in privacy anymore,” Rastko Petaković says and adds that regulations of this kind can be too strict and untimely. 

rastko petakovic advokat

Screenshot: YouTube/Partners Serbia

With the rising popularity of blockchain, there is an increasing involvement of governments to regulate the part which refers to the financial sector which relies on digital assets. 

According to Petaković, crypto exchanges are the best answer to this question. 

“For example, someone hires me as a lawyer, pays my fee in BTC and I find a place where I can pay for my coffee in BTC tomorrow. However, the number of people in this cipher bubble is very small. That is why there are crypto exchanges enabling people to exchange their cryptocurrencies for RSD and thus spread awareness about this technology. As long as there are expectations that RSD or EUR are the primary currency and as long as they don’t believe that BTC is a currency and I claim that 90% of people who own BTC do not believe BTC can be used for transactions – this type of anonymity will not exist. But I’m certain it will improve in time,” the panelist is optimistic. 

“We could have as much privacy as we want” 

In terms of blockchain technology, users are given more control over their data because they can be decentralized. However, the users decide whether they will use this option, ECD founder and co-owner Aleksandar Matanović reiterates. 

“In terms of privacy, we could have as much privacy as we want. If not enough people are aware of how important privacy is, then we will have none. If we have enough people, then we stand a chance,” adds Matanović. 

aleksandar matanovic ecd

Screenshot: YouTube/Partners Serbia

According to him, this lack of privacy in the crypto world does not endanger one of the biggest advantages of blockchain which is a possibility for users to do almost anything they want. 

“What frustrates me the most in the world of traditional finance is that the starting point is that we are the culprits, and we have to prove that we are not. If I want to transfer some money, first they check the origin of the money, if it’s the result of a criminal activity etc. Once you have proven that you are not a criminal, they let you go. While you are in the crypto world, first you make the transaction, and if it turns out that something is not right, someone catches you but this problem is solved later on. The starting point there is not that you are meddling in something,” the panelist concludes. 

“We are the correction factor for lawmakers” 

In addition, Matanović underlines the difference between custodial wallets where an authorized individual keeps cryptocurrencies of users, and non-custodial wallets where users keep their currencies on their own, most often on a hardware device. Both methods have their pros and cons.  

“In the first case, privacy essentially does not exist because your identity is confirmed at the moment when you’ve been onboarded. Then there is also a risk of misuse that happened with FTX as well as the risk that the exchange might be hacked and your funds withdrawn. In the latter case, you have more privacy and lesser risk of misuse, namely you are protected from everything except your own mistakes and omissions. If you lose access to data and backup, these cryptocurrencies are gone forever and not only for you but for anyone in the world too. And this is often the issue, especially for new users. In the past, we’ve seen that people who are new in the crypto world are more likely to lose their funds if they keep them themselves than when they use a custodial wallet. With the growing knowledge, a non-custodial wallet is ever more recommended to users because you’re your own boss,” the founder of ECD, the first licensed crypto exchange in Serbia adds.   

nedelja privatnosti partneri srbija

Screenshot: YouTube/Partners Serbia

According to him, cryptocurrencies are the only type of assets that can be kept in several places and cannot be taken away from you as such. 

“I cannot make any parallel with anything else that exists with the same value. But not only that. If kept properly, it is probably the only type of asset that cannot be alienated. And that’s very important. In our struggle to preserve our privacy and our rights, we have never experienced such mobility of our assets where you can carry your assets with you, which gives us more freedom in our choices,” Matanović explains, and adds that people must act as a correction factor in situations where the legal framework is too limiting. 

“It is a good thing to have an opportunity to breach the law sometimes if the law is not as it should be. History is full of examples where laws were sometimes absurd, and that is the correction factor we can have in comparison with lawmakers. Lawmakers are usually not too encouraging, and we should let them know when they are tightening regulations too much,” the panelist concludes.  

A journalist by day and a podcaster by night. She's not writing to impress but to be understood.

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