Interview: Lyudmyla Kozlovska – Human Rights, Crypto, & Policy

31 May 2024 | Author: GSL

As a high-level introduction, Lyudmyla Kozlovska founded the Open Dialogue Foundation (“ODF”) in 2009 with the goal of protecting human rights, supporting democracy, and assisting those who are subject to political persecution in Eastern Europe. She also founded the Building True Change Coalition (“BTC Coalition”) to address financial exclusion, political oppression and deliver humanitarian aid, while promoting the role of Bitcoin and stablecoins.

Since 2021, she has been leading the campaign to prevent the abuse of anti-money laundering and countering the financing of terrorism (“AML/CFT”) laws by malign state actors. Previously, Lyudmyla initiated the reform of INTERPOL to fight its misuse as a tool of political prosecution worldwide.

The questions below are aimed at better understanding the human rights use case for private, permissionless blockchains and related policy considerations.

Background & Mission

Question 1: Could you explain for our readers why you founded the Open Dialogue Foundation and what your central mission is today?

A: It was only natural: a continuation of my previous activities in Ukraine, during my student days and the Orange Revolution 20 years ago. At that time, just as now, we fought for the European path for my homeland, and earlier, when I had been opposing the presence of the Russian Black Sea Fleet in Sevastopol. Also, I wanted to continue to support the democratic opposition in Kazakhstan and other Central Asian countries whose representatives I met during the Orange Maidan in Kyiv.

Hence, the foundation was established in Poland when I moved there for my PhD, being awarded a scholarship from the Polish Ministry of Foreign Affairs. For Ukraine, and the wider post-Soviet area, Poland used to be a gateway to Europe and the Western world. It became far more complicated once the populist, anti-European Law and Justice party took power there in 2015. We found ourselves on a collision course with the then-government, defending human rights, the rule of law and democracy already in Poland, not just in the post-Soviet area.

Following our international advocacy in defense of rule of law and human right in Poland, in 2018 I was declared a national security threat by the Polish government and banned from Poland and the Schengen area. Since then, other EU Members States and Switzerland disregarded the entry ban as politically motivated and, following the Polish court order, it was ultimately removed in February 2024. Despite facing transnational persecution and the closure of its bank accounts (following the abuse of AML/CFT laws and state-sponsored smear campaigns by three authoritarian regimes), ODF has managed to operate and raise emergency funds for Ukraine (partly based on Bitcoin and stablecoins), for an amount of €8.31 million.

For these reasons, one of our priorities is to defend privacy focused payment solutions and crowdfunding mechanisms before Western policymakers and regulators. We demonstrate how we use Bitcoin and stablecoins as technologies that advance pro-freedom, anti-repression, pro-innovation and environmentally friendly. At the same time, reforming AML/CFT mechanisms, especially the “travel rule,” remains a key priority for us. In the last two years we have published 8 reports on how third country financial institutions are being used by Russia and Iran to circumvent international sanctions while persecuting critics of the authoritarian regimes.

Question 2: What are some of your organization’s accomplishments that you are most proud of?

A: For me, seeking the release of those who defend human rights and freedoms means a lot. Over the past 15 years, the most rewarding thing has been witnessing the hugs of hundreds of political prisoners that we have helped to release. This has been possible thanks to the support of our recommendations by the Members of the Parliamentary Assembly of the Council, the European Parliament, the European Commission, the Parliamentary Assembly of the Organization for Security and Co-operation in Europe, the Office for Democratic Institutions and Human Rights and the United Nations Special Rapporteurs, several national parliaments in the EU, the U.S. Senate, and the U.S. Helsinki Commission.

Discussions at those forums made us quite successful in reforming INTERPOL and Schengen Information System to curb prosecutions for political reasons, winning multiple extradition and asylum cases for political refugees in Europe. We have been one of the first and main Polish organizations supporting the EuroMaidan Revolution in Ukraine in 2013-2014, advocating internationally for politically persecuted peaceful protesters, doing human rights observation missions in the regions and providing humanitarian aid since the Russian invasion of Crimea and Donbass.

We helped to build a network of over 10 thousand of human rights activists in Kazakhstan and Uzbekistan to expose political killing, torture and mass persecution of peaceful protesters, stemming from the abuse of AML/CFT laws by the regimes of those countries. Our advocacy campaigns helped to release numerous political prisoners in Russia, Kazakhstan and Uzbekistan, contributing to the fall of the Plahotniuc regime in Moldova and establish accountability mechanisms against those oppressors.

We were successful defending the rule of law in Poland, winning multiple court disputes with the Polish government in recent years, despite being under politically motivated attacks. As I mentioned earlier, we have raised and provided Ukraine with over €8.31 million of humanitarian supplies since February 2022 (partly based on Bitcoin and stablecoins). Finally, with the use of Bitcoin, we have been able to educate and support other human rights defenders around the world, who have been victims of transnational financial repression, and initiate a discussion in the G7 countries about the need to have remedies against politically motivated de-risking and transnational abuse of AML/CFT laws.

Using Bitcoin & Stablecoins

Question 3(a): How has the Open Dialogue Foundation used or benefited from private, permissionless blockchains and cryptocurrencies?

A: Since 2018, when several authoritarian (including Russia and Kazakhstan) and illiberal regimes (such as Poland’s Law and Justice and Plahotniuc’s Moldova) began severely harassing us on a transnational level with their entire state apparatus, our bank accounts in Belgium have been closed one after another. The regimes easily obtained the Belgian and Polish banking data of myself, my family, the ODF, our company, as well as our staff, including lawyers, accountants, and volunteers. The regimes used this banking information to create a map for coordinated harassment against our donors, aid recipients, and everyone who provided services to us. The situation was especially severe in Kazakhstan, where activists, opposition members, and even the family members of our lawyers and donors were taken hostage, imprisoned for years, tortured, or even politically murdered.

Bitcoin [peer-to-peer] transactions have become an effective tool to fight financial repression, both for us and for the network of activists that we support in authoritarian countries.

Everything changed even more with the Russian full invasion into Ukraine, when, on the one hand, financial institutions and crowdfunding platforms paralyzed transfers and fundraising for any humanitarian aid to Ukraine, and, on the other hand, we needed to save lives and protect our loved ones in Ukraine. With the help of Bitcoin, we were able to raise funds within hours. On the second day of the war, we delivered hundreds of pieces of protective equipment like bullet proof [vests] and helmets as well as medical equipment to Lviv and Kyiv. Many Ukrainians have been saved by the speed of Bitcoin and Tether, the most popular crypto-assets in Ukraine.

We have no doubt that it is a tool to be supported, not suffocated by irrational and utterly biased regulations, and especially in the U.S. and the EU, western democracies. For this purpose, with other like-minded activists, entrepreneurs and industry experts, we established the Building True Change Coalition in 2022 to educate regulators and legislators in the EU, UK, USA and Canada about social use of Bitcoin and stablecoins.

Question 3(b): Looking ahead, do you see your organization relying on Bitcoin and/or other cryptocurrencies more going forward?

A: Of course, I do! Our goal is to promote the adoption of Bitcoin and proof-of-work solutions as tools to support human rights efforts, provide humanitarian aid worldwide, and enhance environmental and energy security.

Given our negative experience with the banking sector in authoritarian countries so far, it’s far more reliable, secure, faster and less expensive to utilize Bitcoin to conduct fundraising activities and transfer funds, preferably on the peer-to-peer basis, than rely on banks which have already been subjected to political influence and weaponized by dictators. Equally, in many countries with emergencies, our network of activists uses Tether for both fundraising and humanitarian aid.

Question 4: More broadly, are there other ways in which you see Bitcoin and blockchain technology potentially benefiting human rights campaigns on a global scale?

A: Certainly, and in our several submissions to both the FATF, EU institutions and FinCEN, we have documented the social, environmental, and energy security potential of Bitcoin and blockchain technology. This is not only to provide financial tools for the financially repressed or excluded, but also to protect election results from AI fraud, as in Guatemala in August 2023.

In our submissions, we cover a wide range of topics, from fighting transnational repression (including legal cooperation mechanisms), semi-blind and discriminatory AML/CFT laws (resulting in numerous cases of so-called ‘false positives’ meaning wrong AML/CFT alerts and debanking of legitimate customers), to delivery humanitarian aid and financial support to those living in autocracies, kleptocracies and failed states. On a daily basis, Bitcoin is used to financially support human rights defenders and lawyers, anti-corruption campaigners, opposition politicians, members of oppressed communities etc. so they could continue their struggle for freedom and democracy worldwide – be it Kazakhstan, Belarus, Russia, Togo, Iraq, Afghanistan, Venezuela and many other places.

Not to mention emergencies and military crises when it’s all about delivering humanitarian aid in a smooth and efficient manner, so disaster victims or Ukrainian refugees could receive help. It’s simply a life-saving technology when the traditional financial sector fails.

Policy

Question 5: How would you respond to lawmakers who say: “Sure, crypto can be used for good, but bad actors are also using crypto to launder money and evade law enforcement.”

In other words, how do you think lawmakers should balance illicit finance concerns with the right to financial privacy?

A: Like all technology or financial instruments, this can be used by both bad and good actors. But, I recommend first examining the data on where the most money laundering and circumvention of international sanctions occur within the financial sector. Without a doubt, it is the banking sector.

A particularly dangerous situation is the consequences of the travel-rule, which places banking institutions in dictatorships and corrupt regimes on equal footing with those in democratic countries. On top of that, I will remind that, as reported, the U.S. is a leader in law enforcement capability with already existing regulation and tools to seize $3.36 billion worth of cryptocurrency. In fact, law enforcement agencies can often easier trace cryptocurrency transactions on public blockchains, specifically Bitcoin, and eventually connect them to real world people and entities. Also important is the assessment of U.S. officials where they acknowledged that terrorists prefer fiat over cryptocurrencies.

For this reason, we advocate that regulation of crypto-assets should avoid unfairly labeling [peer-to-peer] transactions or privacy-focused payment and fundraising tools as ‘high risk’ transactions or solely as tools used by criminals. The consistently data show that the majority of money laundering and financial crimes are committed outside of the crypto sector, putting pressure on the traditional financial institutions. Despite strict compliance requirements, there institutions are often willing to overlook suspicious activities if the transactions are large and profitable enough. And that’s exactly the problem: the current AML/CFT regulatory framework tends to overly scrutinize ordinary customers or non-profit organizations, while financial criminals operate on a larger scale within the banking system.

The same issues apply to circumventing sanctions imposed on Russia and other rogue states – a topic we have been extensively studied. These states do not need crypto to exploit existing loopholes. Instead, they continually create new legal entities in third countries.

Unfortunately, Western institutions often display either naivety or willful blindness in this regard. Sometimes it looks like a game of appearances: symbolically punishing Russia for aggression, but not to the extent that it would affect the profits of their own corporations. This half-hearted approach not only prolongs the conflict, making the West appear ineffective, but it also damages the integrity of the value-based world order and costs Ukrainian lives. Meanwhile, China, India, Kazakhstan, Turkey ruling regimes – they’ve been using fiat currencies and a weaponized banking system to continue trading with Russia. Bitcoin plays no role in these activities.

Question 6: In the U.S., some lawmakers want to give government more visibility into individual user’s crypto transactions. For example, Treasury is considering requiring self-custody wallet providers to collect transaction information, including an individual users’ wallet address along with their name and address for tax reporting purposes. Several Senators have also supported legislation that would require self-custody wallet developers to conduct “know your customer” checks on wallet users (See DAAMLA).

Do you see these efforts as concerning based on your past experiences?

A: Of course we do. That is why we have held 27 face-to-face meetings with U.S. policymakers and regulators (including FinCEN, FATF, and the State Department) explaining the consequences of a discriminatory approach to new technologies. In the EU, we have already conducted nearly 300 meetings since 2022 with regulators and legislators.

One of the frequent questions of western democracies regulators to human rights defenders and opposition in authoritarian countries is ‘how can we help you?’. In this case, we have a specific recommendation: we need to remove negative and discriminatory language about Bitcoin in the regulation and laws in democratic countries, especially in the U.S. and the EU. You can’t stand up to authoritarian regimes being totally deprived of funds, you can’t expose sanctions circumvention, you can’t do anti-corruption investigations, human rights reporting, if you become a target for regimes that can access your financial and banking personal data and financially isolate you even in democracies. For this reasons we are very grateful for policymakers in the Council of Europe who are ready to listen and initiate discussion on how Bitcoin helps “Protecting democracy from disruptions caused by artificial intelligence.”

Question 7: As you share your story with lawmakers across the globe, are there any jurisdictions or government leaders who you see as particularly interested or receptive to crypto’s potential? Conversely, are there any jurisdictions or government leaders who you find particularly hostile to or concerned with this technology?

A: We see an alarming trend: authoritarian regimes such as China and Belarus are setting a concerning precedent by orchestrating the ban of Bitcoin and p2p privacy payment instruments. They justify these actions under the pretext of combating money laundering or fighting extremism, or addressing national security threats. At the same time, these regimes are undermining the international order and abuse AML/CFT laws by evading international sanctions, spreading corruption, and financially persecuting peaceful citizens.

Unfortunately, the regulatory trend to attack Bitcoin extends to democratic countries through propaganda and a failure of some prominent politicians to understand the social, environmental and energy advantages of Bitcoin’s decentralized solutions.

There is currently a risk that bitcoin mining will be banned in Norway, and similar calls are being made in Iceland. In addition, the European Commission and the European Securities and Markets Authority are also using highly discriminatory language in establishing sustainability indicators with an aim to discourage investment in bitcoin mining. We have to do a lot of work with newly elected EU bodies in June to stop these attacks.

Our goal is to join forces as much as possible with Bitcoin users, developers, and miners to advocate for neutral language regarding the technology in the upcoming regulation. Democracy should not be feared, but rather implemented with innovative decentralized mechanisms.

Question 8: In closing, what is one crypto-related policy item that you would like to see policymakers in the U.S. or internationally prioritize in the short term?

A: Given the broad scope of the EU and the U.S., other western democracies agenda, it is impossible to isolate a single item when discussing the regulation of cryptocurrencies. These regulations are addressed in numerous bills that span various sectors, including the fight against cybercrime, environmental security, and many other areas.

But we can give three key recommendations that should be central to every piece of legislation and regulation: an evidence-based approach before creating regulation, extensive public consultation with industry and consumers, and the use of neutral language to innovative technologies like Bitcoin.

Democracies should not follow the regulatory fashion of authoritarian regimes, but instead set trends for decentralization, create new tools to protect human rights, including privacy, in an era where the main war is over data.

Source: Cap Hill Crypto

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