- The Bank of America allegedly divulged users’ information to the authorities.
- This is not the first time such institutions have violated their users’ right to financial privacy.
- Blockchain is the easiest route financial services consumers can take to avoid such breaches.
While blockchain is mostly associated with cryptocurrency and the decentralized finance market, the blockchain module is a larger, more vast project, with standings in various sectors, especially areas needing more efficient cybersecurity options like financial privacy.
In the last few years, the purpose of blockchain networks in finance has been to gradually facilitate the transfer of monetary authority from banking systems to individuals/users, a concept popularly known as “decentralized finance.” If you are an adept follower of blockchain and cryptocurrency, you would know that this transition though largely successful hasn’t gone by without the traditional financial institutions and authorities hindering the functionality of blockchain. They have made several attempts at either outrightly banning cryptos, or imposing strict policies and regulations that are, at best, questionable.
While these moves have mostly been motivated by the loss of financial resources, it has also been a fight for financial data control, the “non-existent” legal right of banks to violate their customer’s financial privacy by sharing such data with third-parties, law enforcement inclusive.
Coincidentally, financial privacy has been a major reason for the growth of blockchain. Individuals and organizations look to control how their funds are being used without any central authority hindrance. While the blockchain network is safer than the traditional banking systems, which are easily susceptible to cyberattacks, blockchain also allows users to control who sees their information and what information is being seen.
How financial institutions violate users’ privacy
Privacy; the reason social media networks design two-way verification methods to secure accounts. The reason mobile phones have locks, debit cards have codes, and mobile banking applications use OTPs. Privacy has been an important topic since the advent of digital technology and the internet, as it has become a rare possession in an age of unlimited internet access.
However, while internet application developers have been seeking ways to reinforce their firewall further and reassure users of their privacy and data safety, traditional financial institutions have been developing more creative ways to make profits and connections off sharing and selling customer information with third-party services while remaining anonymous, thereby breaching the rights of their users to financial privacy.
A notable occurrence is the Bank of America recently divulging users’ information to the authorities using a series of various factors. In the early bloom of the year; following the Capitol Hill protest and the nationwide search for the participants and organizers, the Bank of America allegedly divulged its customers’ financial information to the American government.
While helping the government with information to prevent possible clashes isn’t a crime, the profiling method used to filter suspects was flawed; hence innocent people were caught in the mix. The irony is that people put their money in banks to get security and some level of financial privacy; however, it is sometimes not the result. No one puts their money in a bank because they expect to be arrested for renting an AirBnB within a suspicious timeframe or be detained at work because the “MAKE AMERICA GREAT AGAIN” T-shirt they bought online on the 6th of January identifies with a protest.
While the bank would take most of the blame for its actions, the American Constitution, as it relates to financial institutions, demands that banks and mortgages comply with the government when asked for information; hence there would always be a repeat of these cases. Not without the inclusion of unlucky innocent customers who made transactions at the “wrong” time.
Besides sharing data with government institutions, individual banks have been proven to share customer data with third-party services, especially for marketing and sales promotion. However, this leaves customers at the mercy of fraudulent entities who might be skilled or powerful enough to obtain people’s transaction history or bio-data. This is what blockchain and cryptocurrency look to correct.
Blockchain: Financial privacy and security
If blockchain has a significant flaw, it is that it is multitasking. This makes it sometimes unbelievable to the layman how one module could have tens of functions and be the world standard in all of them.
While cryptocurrency is responsible for the blockchain’s rise, those who understand the module know that it does more than secure and hold digital currency. It allows users to control and determine how the information they put on it is being used/shared. Unlike banks, blockchain is decentralized; hence users are the sole authority and are in charge of their financial privacy.
As a peer-to-peer network, it eliminates the need for a “central agent,” allowing transactions between users only. “The smaller the crowd, the safer the secret” blockchain’s decentralized system doesn’t require or needs government’s supervision, although it demands that operations do not violate the laws of the user’s host nation.
Allowing users to control their personal data and transactions isn’t the only upside of blockchain. Blockchain is possibly the safest means to secure financial assets from cyber thieves. Its module uses cryptography to create personal private keys for users, which are used to access their accounts. This effectively ensures financial privacy for each user on the platform.
Blockchain’s viability is further proven by the fact that tech companies such as Microsoft and Amazon have also bought into the technology to expand their operations further.
What all of these indicate is that to avert a future recurrence of the Bank of America actions, blockchain and its numerous use cases would have an increasingly pivotal role to play in ensuring more financial privacy.