Europol, the law enforcement agency for the EU, is meeting with 16 cryptocurrency exchanges and businesses to discuss ways to combat using virtual currencies for illicit uses.
A conference is being held this week, hosted by EU law enforcement agency Europol. Its purpose is for the agency to meet with a group of cryptocurrency exchanges, wallet providers, and payment processors to discuss ways to cut down on the use of virtual currencies for illicit things.
Cracking Down on Crime
The conference is being held at The Hague, and a Europol spokesman said the event would examine “the abuse of virtual currencies for illegal activities.” Also on the docket is discussing the ways to “enhance the capabilities of law enforcement.”
The main focus of the Europol-hosted event is to track virtual currencies and link them to criminal elements. Attendees are also working on ways to accurately access where a coin comes from by cutting through any attempts to mask its origin.
There has been some talk about authorities creating a centralized system to flag wallets associated with criminals and to place roadblocks on exchanges in order to keep cryptocurrency from being exchanged for fiat.
However, such centralization flies in the face of the very nature of virtual currencies. Plus, exchanges are stepping up their security protocols by introducing more stringent know-your-customer (KYC) systems.
Cryptocurrency Already Working Against Illegality
The chief executive of the Bitpanda exchange, Eric Demuth, says that exchanges are already flagging and tracking virtual currencies associated with bad actors. Third-party services have already found much success in this endeavor, as Demuth notes:
You have a bird’s-eye view from above so you can see every transaction ever done. Every exchange has it, it’s a no brainer. People trying to launder money with bitcoin are three years too late.
However, one could argue that Europol is blowing a lot of hot air over this issue. The reality is that a tiny percentage of cryptocurrency transactions are used for illicit purposes. The notion that a large amount of the crypto world is entwined with criminal elements is the standard FUD thrown out by banks or the media in search of a click-bait headline.
In a Congressional hearing in early January, Jennifer Fowler, the deputy assistant secretary for terrorist financing and financial crimes at the US Department of the Treasury, said that criminals still far prefer using the US dollar. She said:
Although virtual currencies are used for illicit transactions, the volume is small compared to the volume of illicit activity through traditional financial services.
UK cybersecurity firm Elliptic noted in a report that less than one percent of all Bitcoin transactions are criminal in nature. The study noted:
According to our study, the total percentage of identified ‘dirty bitcoins’ going into conversion services was relatively small. Only 0.61 percent of the money entering conversion services during the four years analyzed were verifiably from illicit sources, with the highest proportion (1.07 percent) seen in 2013.
Overall, exchanges are already working hard to beef up their protocols. Then there’s the fact that most coins are not exactly private in that they can be easily tracked. Criminals looking for anonymity have to focus on using privacy coins, such as Monero, but those coins are starting to be squeezed out of some major exchanges. The best bet for having money not be traced to a specific crime is one that has been in place practically forever: using cold, hard cash.
Do you think the conference held by Europol will lead to additional ways to limit criminal use for cryptocurrencies? Let us know in the comments below.
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