Yaya Fanusie: Safeguarding Financial Transactions
INTRO: The following program is brought to you by the Ed Snider Center for Enterprise and Markets at the University of Maryland’s Robert H. Smith School of Business. Welcome to The Inc. Tank. Stay with us to get the inside scoop about technologies that could disrupt and challenge the way you do business.
Christina: Hello. I’m Christina Elson and on this edition of The Inc. Tank, we’ll be discussing the role of government in safeguarding financial transactions from breaches and terrorist acts. We’ll also be exploring the role of educators in ensuring that all students have the opportunity to be at the forefront of changing business practices. Talking with me today is Yaya Fanusie. He’s a Director of Analysis at the Foundation for the Defense of Democracies and an adjunct professor at Morgan State University. Hi, Yaya. Thanks so much for being here today.
Yaya: Thank you, Christina. I’m glad to be here.
Christina: Let me start a little bit going back in time. You were seven years with the CIA as an analyst. You were looking at counterterrorism issues and you’ve been a number of years, four or five years, working in policy. Help us understand a little bit when you first started to see some of these practices that we’re talking about today emerging as a concern for the community, the policy community, and the counterterrorism community.
Yaya: I’ll have to go back to just the nature of my work. I’ve for years like you referenced me working for the CIA. I was always an analyst but also an investigator, someone who is trying to uncover things. So I left government and found myself at the FDD, we call it, Foundation for Defense of Democracies, tasked with…working with our center to look at illicit actors. So basically, criminals, terrorists, folks who are doing an illicit activity and what means they’re using to advance those goals.
And in 2015, I started working at the center and a few people would mention bitcoin, because I was looking at illicit finance. And people will say, “Oh, well, you know, bitcoin is something that cybercriminals are using and hackers.” And people talk about terrorists using bitcoin, and there were a few reports about ISIS using bitcoin. And back in 2015, I was new to this whole world of FinTech. I knew nothing about cryptocurrencies. But the researcher in me said, “Okay, terrorists are using bitcoin, let me figure out what they’re doing. Let me track them. Let me investigate.” And it was always very difficult to substantiate these claims of ISIS using bitcoin. People would say it but then when I would try to find the sourcing, corroborate it as an outside open source researcher, I couldn’t verify it. But it was sort of stood in the back of my mind that this was a potential concern.
And about almost a year later, in 2016, I saw a press report in an obscure press report coming out of the Middle East and it said that there was a terrorist organization that was based in the Middle East that was raising funds through bitcoin. And when I first I saw it I said, “Yeah, okay, this sounds like another one of those press stories. Maybe it’s hearsay like, yeah, you know. Let’s look into it.” And I decided to look into it, I actually had a bunch of interns or a few interns, I wish I had a bunch and I said, “Let’s check out this press report. Let’s see if this group is actually raising bitcoin. Let’s see what we can find out.”
The group was on Twitter. They had a Twitter account. They had infographics and they saw something that I had never seen before. They were soliciting funds and in their graphic, they actually had a QR code. And the QR code, once you scanned it, and we could do this, it went directly to blockchain.info which is a site that linked to the bitcoin address with that QR code and we could actually see what was in the address, you know, like an account. So that was the first time that I ever had the opportunity to look at something. It was a verified terrorist group, a media outlet, and we were actually able to look at the transactions, study them, see how much they had raised. And that was the beginning of me looking at blockchain technology and how illicit actors could use it. It doesn’t mean that that’s the only way it’s gonna be used but that was the beginning.
Christina: That’s fascinating because the technology, it’s moving so fast now and there’s so many new applications for it and so many people looking at ways to modify to make it more useful for every industry including the nefarious ones that we’re gonna be talking about. So what are some of the things that we need to be thinking about or that you’re seeing even a couple of years on in terms of how it’s progressing, how it’s being used more and more?
Yaya: The first thing is that criminals are often early adaptors of technology, right? One thing I’ll say is when you think about particularly terrorists, right now it’s not that terrorist, you know, groups like ISIS and Al Qaeda, it’s not like bitcoin and cryptocurrencies are their go-to technology. What we’re seeing is experimentation. We’re seeing campaigns here and there that we discover where they’re actually trying things out. They’re putting up a bitcoin address and then if they don’t get a lot of funding then they’re trying to tell their followers how to find bitcoin. They’re trying to teach people. Then they’re branching out into different types of coins, different coins besides bitcoin. So there’s an experimentation going on.
The key there is that if terrorists are going to sort of being at the front, ahead of the curve and on the front lines of innovation, those of us who are trying to stop terrorist funding, stop these actors from, you know, their plotting and getting resources, we sort of have to be as smart if not smarter than them. So one of the key messages for government is, okay, don’t sleep on this technology, right? Like the folks that you’re hiring, many of whom don’t know much about blockchain technology, people are gonna have to learn this, we’re gonna have to hire people who understand it, and that’s just on the terrorist spectrum. If we think about state actors who were getting very aggressive with understanding blockchain technology, investing in it, building blockchain systems, because many of them want to evade sanctions or find workarounds. So that’s another issue.
Christina: Yeah. So let’s talk a little bit about that because there’s been some great news in that area recently. I’d love to get your perspective on what you’ve been seeing. You know, first, we saw Venezuela going for the cryptocurrency fundraising scheme. You know, now we’re seeing the news that Iran is thinking about doing the same thing, you yourself have written about this. And behind it, all seems to be Russia. And so what is going on with this space or these entrepreneurs, you know? This get very complicated very quickly but help us understand something about this.
Yaya: Well, a good way to think about it is really the history of what happened with Russia. Russia is a very interesting case study because in, I don’t know, maybe 2014 when bitcoin was getting big in Russia, people were talking about bitcoin, the Russian government was very much against bitcoin. There was legislation that was being drafted to ban bitcoin and to ban cryptocurrency businesses. That was the thing in Russia within the government. We noticed though in about 2015, 2016 there started to be some different voices within the government saying, “Hmm, okay, well, let’s not necessarily ban bitcoin.” And you know what, this technology could be very useful because many Russians banks are sanctioned to buy the U.S. and the EU for Crimea and some other things.
And so because Russian banks are under sanctions it makes it difficult for them to receive capital and for them to transact as they would if there weren’t sanctions. So we actually started to hear Russian officials say, “We should use this blockchain technology so that we could evade sanctions.” So that basically what they were saying is so that we can start transacting with the world in a way where we’re unencumbered by sanctions restrictions. And Russia took the first step I think to start investing in blockchain technology. They’re doing a lot of pilot programs and it’s not just within the banks, other parts of their government are looking at integrating blockchain technology.
In essence, you know, technology is good, innovation is good. I mean, we’re seeing this around the world, right? Everyone is looking into blockchain technology. Not a bad thing at all. But what is interesting is that Russia is trying to work with others, I’d say to…well, let me back up, think about Facebook. Facebook is the biggest social media company and if I say, “You know what, I want to create my own social network. I don’t like Facebook, so I’m gonna create my own Yaya Facebook,” I can do that, it’s very easy. But it’s not gonna be anything unless I get other people to join it, right, other people to join the network for it to really work.
And it’s similar with blockchain technology. A country can say, “I want to create a blockchain technology so that my banks can do business.” But if you’re not gonna have other countries that sort of opt-in, it’s not gonna work. And we think that’s what Russia is doing. Russia is trying to build but also trying to encourage Venezuela to get on the cryptocurrency bandwagon. And now we’re seeing strong moves with Russia meeting with Iran and now Iran making the same announcement. And that’s what we’re seeing, we’re seeing on the horizon, state actors who don’t like sanctions deciding that they’re gonna work together to try to create an alternative financial system with blockchain technology at the root of it.
Christina: When it comes to dealing with these kinds of authoritarian regimes, what are the tools that we have at our disposal? Because Americans love progress. They love freedom. They see technology as something that helps create well-being and prosperity for lots of people. So there’s sort of, I think as you said, an inherent disconnect between liberty, libertarian values, and the use of technology for these sort of authoritarian and other kinds of ends. So what can we do to counter that, to help counter that and keep these technologies associated with free liberal democracies more so than the alternatives?
Yaya: The first part is realizing that there’s a race going on. I don’t know if this term will stick but in one article, I said it’s the crypto race, you know, akin to the space race, right? In space race it was Russia, the United States, you know trying to get to the moon and try to advance technologically with space. I think something similar thing is happening except in this race, Russia knows it’s in the race. And I don’t think America realizes that there’s a race going on.
Christina: We don’t know we’re in the race, yeah.
Yaya: We don’t know we’re in the race. So that’s the issue. So blockchain technology there’s a beauty in the fact that this technology, it’s part of the internet which has grown because of open source software, open source platforms, and that’s not something that you could or necessarily should want to stop, right? The innovation with open source platforms. That’s the beauty of this technology that it’s opening up so much. And so it’s reaching so many different people and so many new business models.
So the approach can’t necessarily be how do we stop them from innovating. I think the approach is more, “Okay, so if we see that this development is happening how can we make sure that we’re involved,” we meaning sort of the U.S. How can we make sure that we are involved in its development, in the business models that it creates? Because whoever sort of gets out in front and develops these new global networks for transferring value outside of the regular banking system, whoever gets involved in that and builds that is going to have an advantage.
And so if we’re concerned that let’s say an actor like Russia or even China in some ways and Iran, which don’t have the same respect for liberty and human rights, if we want to make sure that this technology is used for good then we should compete to make it good from our standpoint.
Christina: Thinking a little bit about then what we can do to help make sure that we’re at the forefront of bringing these technologies into the world for good, let’s say, what are some of the tools that we have at our disposal to do that? And also let’s talk a little bit about the business community because the business community clearly has a role in this. So when we see companies that are entrepreneurial or entrepreneurs even in the U.S. who are looking for opportunities to be in these emerging technology spaces, how should we make sure that they’re helping them understand how to do the right thing, let’s say?
Yaya: So I think part of it is we have to bridge this gap between the tech space and the financial space. Now, everyone when they think of how like blockchain technology is doing so much they think about, “Oh, yeah, that’s FinTech. That’s the financial sector.” And the thing that I point out is actually most of the real development here is not happening in finance, it’s happening in tech. And there’s this gap because the financial world knows all about anti-money laundering. like they’re up to their earballs in what we call AML, anti-money laundering and, you know, all that stuff. Counterterrorism, financing, that’s a part of the business in the financial world.
The tech world is new to finance, really. And so they’re building and developing at a breakneck pace and not necessarily thinking about, “Oh, how does this relate to terrorist finance and all these other things,” right? And I think we have to bring the two together so that folks that are in tech sort of learn from the financial community which kind of understand these issues. Now a lot of people might say, “Well, but the financial community is behind, right? And tech is just so forward. They just break things and move fast and ask questions later.” But with finance, anything dealing with money, that’s the thing. It’s a little bit different because of the stakes, because we’re talking money and money funds all types of things. And money can be used for a lot of different aims. We have to really make sure that we’re at least asking the questions.
Christina: Yeah. And I mean I’m all for a continuous improvement and, you know, making sure that you’re moving fast and not getting held up by overregulation. At the same time, we do have to really think about making sure that people aren’t putting themselves and others into situations where they’re just really gonna contribute to something that’s very detrimental to the whole business and tech community.
Yaya: You made me think of another thing too which is there’s also that issue of you don’t need a blockchain for everything. There’s so many examples though of people sort of getting on the blockchain not bandwagon but being like, “Oh, I’m very curious about blockchain.” I actually say there’s sort of this arc of blockchain familiarity which is first is what’s blockchain, like I’ve never heard of it before. Then it’s like, “Oh, this blockchain is interesting,” right? You started learning more. Then as certain time goes by sort, you start reading more, you’re like, “Wow, this is very intriguing, blockchain can do everything. Everyone needs a blockchain. You get a blockchain, you get a blockchain, everyone gets a blockchain, and blockchain is gonna save the world.”
And what I discovered, because I went through this which is why I’m able to say this. Then as you sort of learn the technology you realized that so much of it is their pilot programs, their press releases, that aren’t really news, it’s just a press release. You realized that there are a lot of limitations still, there’s a lot of experimentation, and there’s a maturing that happens. And I think we have to also bring that to the space where we’ve got to really make sure that people understand you should have criteria for embarking on a blockchain project. Don’t just do it because it’s blockchain, that there’s actually a lot of the times where it will be more expensive and more cumbersome to embark on a blockchain approach.
Christina: Yeah. And certainly, you know, even for investors making sure that you’re not just throwing bad money after bad money after bad business idea, right?
Yaya: Yeah, following the hype.
Christina: You know, you’ve touched on this overlap between FinTech and technology, finance, really understanding how those two need to mesh together. It’s probably creating a lot of new opportunities for people to develop their skills and to think about what kind of career they can have. So let’s talk a little bit about that. You yourself you said that you didn’t come out of school with a blockchain degree and you’ve learned a lot of this on the job. But what kind of skills do you think you yourself wanted to have as you’ve started into this space that you’re in and what are some of the things that you developed along the way?
Yaya: This will sound maybe cheesy but the number one skill to sort of get smart in this space is curiosity. There’s no one class, there’s no one book. What I found, when I knew nothing about bitcoin or blockchain and I started to investigate it, I found that what was most useful was the informal ways of education. One of those is podcasts, honestly.
Yaya: You know, yeah.
Christina: I like that.
Yaya: It’s a…softball for you there. No, I’m so serious because in an environment where you could find articles here and there and there are some online courses but even those, they don’t give you the full picture. And I found when I would maybe read an interesting blog or Medium article by someone, I would go and put their name in a podcast app and then listen to them talk for an hour or 45 minutes about what they’re doing in the blockchain space. And they would mention other companies. There’s this growing library of people on podcasts who are experts because podcasting is the way of the future, right, for technology, new businesses.
That led me to find out who should I follow? Who should I follow on Twitter? Twitter is a great place. It will point me to the developers, the people in the space, the new companies that are really building. The crypto blockchain space is a living, very organic space, and you sort of have to kind of not be in it in terms of being a developer or coder but you kind of have to be sort of in the midst of the people who are doing it, whether that’s listening to them, following them, consuming them. You’re not gonna get it from government sources or academia, although academia is now sort of catching up.
Christina: So that brings us to the role of academia.
Christina: So what should academia be doing because I saw a vast article a few months ago, I think it was in “The New York Times”, and, you know, it’s talking about this idea that colleges and universities are saying that students are just hungry for this, just as you’re saying. And they’re trying very hard to think about how they can help them understand this landscape. But, you know, it’s tough. It changes a lot and academia is often not the most rapidly changing place.
Christina: So what are some things that you think academia could be doing better perhaps?
Yaya: There are a few steps. Interestingly, the first step starts with academia engaging outside of academia, right? Because even in the computer science departments, many of them are not really into cryptocurrency blockchain technology or it’s new to them or they’re very new to it. So the first step is having people either in the industry who know the technology engage the computer science departments, the business school departments, and that’s one of the things that I found to be helpful. I’ve had conversations with folks in higher ed who I brought up blockchain technology cryptocurrencies and they responded with, “What is that?”
And so we had to have a conversation about, “Well, this is what blockchain and this…” you know, and I remember having this conversation last year before the price rise of cryptocurrencies and they were like, “Oh, this is interesting, blockchain.” And then as the months went by then the price started going up and they’re hearing it all around them. So one, getting people on the campus, guest lecturers, the thing is you’re right, the students are, they’re on it. Most campuses now have some sort of blockchain club, cryptocurrency club. And that’s good, that’s gonna happen, that’s gonna develop. But I think for academia to fulfill its mandate, academia should go through a more structured process of finding how to integrate blockchain technology into the curriculum.
You may or may not have a blockchain class but maybe you can have components where you look at blockchain technology within the, you know, computer sciences, the hard sciences, and within business which is sort of the root that I’ve tried to tap into. Business schools should find ways to integrate whether it’s guest lecturers, seminars, and the like. Just getting exposed is the first step.
Christina: For me business schools have a real role to play in helping people understand what the world of tomorrow is gonna look like, you know, and that’s a very interdisciplinary approach. And so business schools should, in my view, I’ve been thinking very seriously about that.
Christina: So you reached out to Morgan State University and you’ve been teaching there. Tell me about that? What are you doing? What are your goals? And, you know, you’re a busy guy. So to go and starting teaching classes, you know, at a university setting, what is your motivation? What are you hoping for there?
Yaya: I am hoping that others do better than I did. You know, I’m from California, I went to UC Berkeley in the ’90s. So I graduated in 1997 and looking back now, I realize that I was right next to the center of technological innovation. The epicenter that brought about all of the business models that we deal with now, the Facebook, that all came from the ’90s innovation. And I realized looking back that I was totally oblivious to it. I was an economics major. I wasn’t into technology per se. But now I’m thinking back and I’m like, “You know, I probably should have understood it, this technological wave. I would have been more prepared for all these changes.” And my focus since undergrad was economic development. I did a thesis on economic development in the inner city of the U.S. compared to rural Zimbabwe. And that’s a whole other story.
But I was really concerned about this issue of economic development and I thought about, “Wow, so much wealth was created from the internet, this wave of the internet.” And I totally missed it. And a lot of my friends, a lot of folks who I think were focused on economic development issues, particularly community development, I was really focused on empowering the African-American community with economics. And I totally missed it. I missed it. And I thought as I started to learn about blockchain technology, yes, at first, I was looking at the illicit side of it for my work but then as I actually started to see wow, I actually see new business models opening up.
I’m not a blockchain hype person but, you know, I’ll admit that there’s some revolutionary technology here that is enabling some new processes, right, some new ways of doing business. And it really seems that this mode of technology is gonna be very important for future business. With that, I said to myself, “How can I ensure that students like me, you know, now, 20 years later don’t miss out on this technological wave?” I reached out to a friend at Morgan State University which is an HBCU, Historically Black College University, and I said what I told you before, I was like, “Would Morgan be interested in like bringing awareness of this technology to the students?” And my friend was like, “What is blockchain technology?”
Christina: Yeah. That’s what a lot of people say. Sure.
Yaya: What is that, you know? And that started a series of conversations. And to your question, what do I want to accomplish?
Yaya: So I’m teaching a course, it’s an elective course on blockchain app development. And the aim is to provide an interdisciplinary approach where students who, many do not have strong programming knowledge, for them to understand the key concepts of blockchain technology, what blockchain technology is. But even more than that, to understand what it enables. You know the nuts and bolts of how it works. You do have to understand the basics. But then to really, if you’re not in computer science, what you really need to understand is, “Okay, we’ll what might this allow me to do or allow businesses to do?”
So we’re teaching that and then the final outcome is we want students to create and define solutions. We want them to create solutions and we’re actually helping the students look at problems that they’re seeing and propose ways to come up with a blockchain solution to some either problem or some business idea so that they’ll be familiar with it. They’re not gonna become…well, some of them may become coders because we’ll provide some mentorship for them but most of them are gonna go off. They’re gonna do something outside of computer science but we want them to be prepared to understand this technology and then how it could be applied.
Christina: Yeah. And that’s so important because even going to work for another firm, the difficulty of bringing in the technology and really understanding how to use it internally to help that firm be successful and innovative and continue to improve, there’s so much that has to change from within. And so you really do need people that can embrace this on all levels and then really be able to communicate what benefits they can bring, whether you’re starting your business or doing that for someone else. So, yeah, that’s fantastic. So what else do you see in terms of skills that you would like to see young people in school pursuing? What kind of landscape do you see for them as they’re coming out into the work world?
Yaya: The answer is different based on students inclinations. To me, it’s glaringly obvious that coding skills are gonna be very important for the future, for future students, for future business. I’m not a coder myself but I can see that students going into programming will likely have a bright future, particularly because some of these new platforms…so for example, you take a blockchain like the Ethereum blockchain, right? That’s this blockchain built on smart contracts and the smart contracts are built in this language called Solidity. And there’s a dearth of Solidity programmers. So if you learn Solidity and you’re an undergrad or in high school, if you learn Solidity you will likely at least in a short-term really find a job easily, because all the development that’s happening in that language.
So there’s definitely an encouragement to pursue coding and computer science. Programming is very important. But that’s not gonna be everyone, everyone’s not gonna go into computer science. So I think the key thing is something that’s not so developed but people should start to think about, which is crypto economics or token economics in different terms. That’s not a new economics but what we have is this technology enables new ways of incentivizing processes, new ways to monetize things which couldn’t be monetized.
I was actually talking to an economist just a few days ago and he was talking about this idea of let’s take a young athlete who whether it’s, let’s say let’s take football for example, whose a star football player and you want to support that player. What if there would be a way where because you have blockchain technology you could actually invest and support someone’s schooling, you know, or education or whatever they’re gonna do through a smart contract where you invest in them and you could get a percentage of future earnings if you wanted to write a contract like that?
Now that might seem sort of unusual but imagine how that could open up investment into young people, into talented people in a way that you couldn’t before. What undergirds that is this idea of using a token to incentivize new processes and new behaviors. So crypto economics, I don’t know if that term is gonna last, but this idea of looking at cryptocurrency incentives is gonna be important for future business, I think.
Christina: I think that’s very insightful. Thank you so much for sharing that. Right now we’re seeing a lot of games but to think about moving beyond crypto kiddies into actually, you know, helping artists, athletes, you know, or whoever, you know, musicians, sort of think about how to navigate and have a bright successful future, I mean that’s really cool. Okay. So here’s a question for you, I like to ask all my guests to fill in the blank. In 20 years because of blockchain, the biggest change in my day to day life will be?
Yaya: Will be that I will be able to fund and invest in my grandchildren from their early days and I will be able to track that funding. And I will be very much aware of the resources that my grandkids have at their disposal. Because this engagement with the blockchain, even if it’s not something where everyone talks about blockchain-blockchain, it’s just gonna enable more movement of funds and I think more investment in people as individuals.
Christina: That’s fantastic. I love it. That’s something really to look forward to, not the Russian Skynet, right?
Yaya: Or that too. We might need terminators…
Christina: Yeah, we don’t want that, in that case. So [crosstalk 00:28:39]. Okay, all right, well, Yaya, thank you for talking to me today. It’s been really great to have you here.
Yaya: It’s been great talking to you, Christina. Thanks so much.
Christina: Here at The Inc. Tank, we’re passionate about educating students on how to thrive in the business world. We encourage them to seek out knowledge on innovative technologies like blockchain that will most certainly have a great effect on their daily lives. Thanks to Yaya Fanusie for talking with me today. Until next time, this is Christian Elson in The Inc. Tank.
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