Are Digital Currencies Really A Front For Major Crime?


One of the major criticisms levelled against cryptocurrencies are they are a front for organised crime – but is there any evidence to support the claim?

Justice officials around the world argue the anonymity of dealing in digital currencies helps crooks, terrorists and money launderers to ply their dirty trade across borders without fear of detection.

Undoubtedly, the new online frontier set up by the rise of cryptocurrencies has provided new opportunities for fraudsters to operate under the radar of financial regulators and the police.

But there seems to be little hard evidence to suggests digital currencies are any more liable to manipulation by serious criminals than any other financial activity.

Governments and regulators have issued some reports on the relationship between cryptocurrencies and financial crime – but none seem conclusive.

What the evidence says

A report by regulators in Hong Kong says: “While we have not found substantial risks in these newly developing payment methods or commodities, this is a rapidly developing area requiring continued monitoring.”

Research by the Center on Sanctions and Illicit Finance found: “The amount of observed Bitcoin laundering was small – less than 1% of all transactions entering conversion services.”

Bank of England governor Mark Carney alleges ‘a huge amount of illicit activity’ runs through the virtual world of cryptocurrency – but added that “cryptocurrencies aren’t a risk to the financial state as the amount involved are still small and cryptocurrencies are not connected to the financial system.”

And there’s the truth of the matter. Governments fear the potential of criminals exploiting cryptocurrencies because transactions cross-borders and are anonymous.

That is why they want to act now to establish control over what they view as a grey area hidden from their eyes.

Technological not financial revolution

A clear picture of how the authorities plan to take control of cryptocurrencies is emerging.

They understand they cannot control the consumers because they are not pegged down to a financial or legal jurisdiction, but they can regulate exchanges that have physical locations and personnel that can be subjected to the rule of law.

And the future of cryptocurrency does not appear to reside in Bitcoin, Ethereum or any of the many hundreds of other digital coins and tokens.

Big banks and corporations are moving into the cryptocurrency zone and they regard the blockchain as the key to the future of online transactions.

This makes cryptocurrency a technological revolution, not a move into decentralised currencies.