As the Gun Market Moves to Crypto, Deeply Private Owners Reveal More Than They May Know

In American gun culture, a desire for privacy runs deep. For many gun owners, any government attempt to keep tabs on who owns what is a non-starter. “I’m not for any type of registration,” John Crump, the special projects coordinator at the Gun Owners of America, said in a recent interview.

Cryptocurrency advocates have a similar ethos and often talk about empowering people to avoid government oversight via their newfangled financial ecosystem.

This piece is part of CoinDesk's Sin Week.

Crump lives in the overlap between those two worlds. At GOA, which describes itself, quoting former U.S. congressman (and presidential candidate) Ron Paul, as "the only no-compromise gun lobby in Washington," he’s an in-house expert on crypto and blockchains.

The latter, of course, is what makes crypto possible in the first place. Blockchains are digital accounting ledgers that publicly track when a token moves from one person to another. While built to be anonymous (nobody has to record their identity in a blockchain), that shroud of secrecy can be pierced by law enforcement or anyone with the right sleuthing skills.

And that’s where crypto can get tricky for gun owners. In effect, when someone purchases a gun with a cryptocurrency, a digital paper trail is created. The blockchain record might not spell out the name of the buyer and seller or what gun was exchanged, but the transaction is logged so privacy cannot be assured.

“Honestly, I don't think a lot of people realize how everything is traceable,” Crump said. “A lot of people in the firearms market, when they hear bitcoin or crypto, they automatically assume that it's untraceable and private. But they don't realize that blockchain is a ledger. Everything is there.”

Guns are a deeply divisive issue in the U.S., making it hard to imagine any compromise between those who advocate for them and those who want restrictions. But not all gun-control advocates want to ban firearms. They just want hurdles, aiming to keep weapons away from people who will cause havoc. Blockchains are one proposed solution, pitched as a solution that would also permit at least some privacy.

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Tom Heston, a clinical associate professor at Washington State University’s Department of Medical Education and Clinical Sciences, approaches the gun-violence epidemic from a public health perspective. His 2017 paper titled “A Blockchain Solution to Gun Control” proposes a blockchain-powered universal ID to track guns and ammunition. That, Heston argues, would help enforce gun-control measures such as red-flag laws, which let police temporarily seize firearms from people thought to be a danger to themselves or others.

Such a system, he argues, wouldn’t include personal information like names or addresses on the blockchain. But if law enforcement needed to identify someone it could do so by connecting a crypto wallet address to the actual person behind it. “Having a way to identify people while also maintaining their privacy is, I think, that combination that cryptocurrency brings,” Heston said in an interview.

The gun lobby strongly disagrees with Heston’s take on registries and privacy. (In June, the state of California accidentally leaked the personal information of gun owners, the worst nightmare of privacy-focused gun owners.) Heston counters this argument by sharing that Congress has just passed a gun-safety law, “and those red-flag laws require databases. So why don't we have a database that protects privacy?”

The National Rifle Association, the 151-year-old gun-rights group, isn’t receptive. “The NRA is now and will always be against a firearm registry of any kind for the simple fact that registries lead to confiscation,” said Lars Dalseide, a spokesperson.

While GOA’s Crump basically agrees with the NRA, he suspects an important kind of record required by the U.S. Department of Justice might get moved onto a blockchain: Form 4473. When buying from a gun dealer or another seller licensed by the U.S. government, the purchaser must present a 4473 to the retailer, which states the personal information of the person purchasing the gun, as well as the gun serial number and who the seller is. The paper document is then kept in the shop forever. These forms are not digitized, partly because many gun owners don’t want a database storing their personal information. (The 1986 Firearm Owners Protection Act prevents the federal government from creating and maintaining a gun registry.)

“Am I for that?” Crump said of digitizing 4473s on a blockchain. “No.” But he added: “I do see that as something that could be done and I do see that as being the future, even though I’m not for it.”

The gun market has embraced crypto partly because some conventional payment processors no longer handle firearms transactions, or have made doing business through them financially untenable. Stripe (STRIP) and PayPal (PYPL), for instance, completely ban gun sales through their platforms. Visa (V) and Mastercard (MA) tack on a transaction fee of up to 7% for firearms retailers.

Broader use of crypto in the gun industry would “eliminate the ability of gun-control groups to manipulate financial institutions into circumventing our electoral, legislative as well as our regulatory process when calling for the de-banking of a perfectly legal industry,” the NRA’s Dalseide said.

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There are projects that aim to make firearms more accessible through crypto. The Universal Settlement Coin (TUSC) is a cryptocurrency designed to facilitate paying for things when conventional digital money isn’t an option. Paying for guns is just one example. (In theory, this could also include paying doctors for abortions in states where the medical procedure is illegal, or buying marijuana where it’s outlawed.)

“The gun world is an industry that absolutely can benefit from crypto because traditional finance hates the gun industry,” Rob McNealy, one of the project’s founders, said in an interview.

As for paying for guns with cryptocurrencies, expect that to continue, even if the original promise of crypto – anonymity – isn’t always achieved. Crump, the GOA crypto expert, says he has paid for guns with bitcoin (BTC), ether (ETH) and TUSC, and will continue to do so.

“I have used crypto to buy guns online,” he said. “But if I wanted to be private, it’s something I wouldn't do.”