When people finally started to understand cryptocurrencies a bit, they knew that the biggest risk would be security.
This new, smart and innovative way to transfer and store funds was a gold mine for potential illegal activity. In 2013 more than 80% of all bitcoin transactions were done by criminals. If we fast forward 5 years, that figure has now dropped down to less than 10%.
A DEA agent was interviewed by Bloomberg on the connection between cryptocurrencies and illegal activity.
Many companies, banks and even governments use Bitcoin and other cryptocurrencies today for trading, investing and even security. Unfortunately, the number of illegal actions involving the technology has only increased through the years.
While the vast majority of usage is done legally, the shadow or dark market has also grown. With blockchain technology becoming more widely used it’s normal that criminals will try to exploit its benefits for money laundering and other illegal activities. This is however, a double edged sword.
Since blockchains are immutable and public they are a free resource for government agencies to keep track of the transactions and patterns. And anonymity, being one of the most important weapons in the criminal’s arsenal is being threatened by this concept.
Money laundering being the biggest crime tied to crypto requires the criminal to conceal his identity and sever all links to and from the financial transaction. This why Anti-Money laundering (AML) efforts are so focused on crypto. So this in turn creates the paradox that cryptocurrencies are safer and at the same time more dangerous for criminals to use. In the dark web, 99% of the transactions are done in crypto. Of course that doesn’t mean it’s only bitcoin, altcoins are getting increasingly more popular.
A big threat to this would be the “zero-proof technology”. It can essentially be used to create absolutely anonymous altcoins by removing the ID information (sender and recipient and amount) of a transaction from the blockchain ledger. This will eliminate blockchain technology’s most celebrated feature regarding AML. This was done for the first time by Zcash.
This leads to the conclusion that criminal organizations won’t be stopped by regulations and restrictions from using innovative technology to improve their work. Law enforcement is to follow and even be one step further.
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Tags:AMLAnti Money LaunderingbitcoinCriminalsdark webDEAEthereumIDmoney launderingzcashzero-proof technology