{"id":39579,"date":"2018-05-30T11:00:53","date_gmt":"2018-05-30T01:00:53","guid":{"rendered":"https:\/\/www.aspistrategist.ru\/?p=39579"},"modified":"2018-05-29T16:22:17","modified_gmt":"2018-05-29T06:22:17","slug":"regulating-digital-currencies-to-fight-crime","status":"publish","type":"post","link":"https:\/\/www.aspistrategist.ru\/regulating-digital-currencies-to-fight-crime\/","title":{"rendered":"Regulating digital currencies to fight crime"},"content":{"rendered":"
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Australia took an important step in countering the criminal use of digital and cryptocurrencies when legislation regulating digital currency exchanges under Australia\u2019s Anti-Money Laundering and Counter-Terrorism Financing <\/em>(AML\/CTF) Act 2006<\/em> came into effect on 3\u00a0April. This regulation has many positives aspects. But digital currencies will continue to facilitate crime and will remain a challenge to law enforcement.<\/p>\n

Regulating the industry is necessary because it removes an intelligence black spot that\u2019s exploited by criminals. Digital currencies\u2014including cryptocurrencies such as<\/a> Bitcoin, Ethereum, and Ripple\u2014pose numerous security challenges<\/a> for governments. They\u2019re known to be used in a range of crimes, including ransomware<\/a>, terrorism<\/a>, and the purchase of<\/a> drugs, weapons and child exploitation material, often through the dark net<\/a>.<\/p>\n

They\u2019re attractive to criminals due to the pseudo-anonymity<\/a> created by cryptography and a peer-to-peer architecture provided by blockchain<\/a> technology that negates the need for a central authority such as regulated bank settlement or government control. While all transactions and past ownership details are recorded in a publicly accessible ledger on the internet, computer code rather than individual names and addresses act as the owner\u2019s digital signature in the blockchain.<\/p>\n

The new legislation requires digital currency exchanges to register on a Digital Currency Exchange Register maintained by AUSTRAC, Australia\u2019s AML\/CTF regulator and financial intelligence unit. Two exchanges\u2014CoinSpot and Independent Reserve\u2014were the first to be registered<\/a> when the legislation came into effect last month. More than\u00a080 are now registered, with more applications pending.<\/p>\n

Registered exchanges will have to collect and verify the identity of their customers and report to AUSTRAC details of suspicious matters and transactions involving physical currency of\u00a0$10,000 or more. The laws apply when customers exchange digital currency for money or vice versa. These legislative changes are a positive step. They\u2019ll provide new intelligence to government, particularly around suspicious activity. And regulation at the point of conversion between digital currency and real money is sensible because it\u2019s a good place to \u2018de\u2011anonymise\u2019 criminals<\/a>.<\/p>\n

It\u2019s certainly about time that regulation was introduced in Australia<\/a>. The first decentralised cryptocurrencies emerged in\u00a02009. According to Bradley Brown<\/a>, AUSTRAC\u2019s National Manager for Strategic Intelligence and Policy, criminals \u2018have had a pretty audacious start in relation to digital currencies and cryptocurrencies for the last nine years\u2019.<\/p>\n

But the Australian government should be applauded for regulating the currencies, rather than introducing outright bans on them, as other countries have<\/a>. Digital currencies and blockchain\u2014the technology underlying cryptocurrencies such as Bitcoin\u2014have legitimate<\/a> and promising uses, and innovation should be encouraged. Benefits and opportunities<\/a> include lower costs and faster payments, improving the efficiency of humanitarian aid delivery<\/a> and increasing access to financial services<\/a>.<\/p>\n

Also positive is the response to regulation by the digital currency exchanges themselves. While some have bemoaned the cost to business<\/a>, many have welcomed and even lobbied for regulation<\/a>. As a director of Independent Reserve pointed out<\/a>, there\u2019s a \u2018legacy stigma\u2019 with digital currencies in which many people associate the currencies with crime.<\/p>\n

Regulation under the AML\/CTF Act will provide greater legitimacy, and give confidence and assurance to consumers, investors and business. This includes the banking sector<\/a>, which has made it difficult<\/a> for customers to trade in digital currencies, and for digital currency exchanges to hold bank accounts, owing to banks\u2019 concerns about the risk of facilitating crime.<\/p>\n

A further positive is the cooperation between the regulator, AUSTRAC, and the regulated sector in devising the new rules. A number of workshops were held between the regulator and digital currency exchanges before the legislation was drafted. This co\u2011design aligns with AUSTRAC\u2019s smarter regulation program<\/a>.<\/p>\n

Despite these positive developments, digital currencies will continue to be exploited by criminals, and present an ongoing challenge to law enforcement and intelligence agencies.<\/p>\n

First, there\u2019s inconsistent regulatory treatment<\/a> of digital currencies worldwide. While some countries have banned digital currencies, others\u2014such as the European Union\u2014are only considering regulation<\/a> under AML\/CTF legislation. For as long as this remains the case, individuals seeking anonymity can join digital currency exchanges in unregulated jurisdictions.<\/p>\n

Second, Australia\u2019s new regulations apply at the point where money is converted from real currency to a digital currency and vice versa. But many transactions don\u2019t require a conversion because money is spent on goods and services or exchanged for other digital currencies. There remains a lack of transparency around many of these transactions, especially when compared to traditional banking.<\/p>\n

Law enforcement has previously been able to exploit privacy weaknesses<\/a> in digital currencies to identify criminals<\/a>. However, the currencies\u2019 degree of anonymity is one of their most popular features\u2014for legitimate and illicit reasons alike.<\/p>\n

Therefore, we can expect the continued development of privacy-hardened cryptocurrencies<\/a> and other techniques<\/a>\u2014such as the use of TOR browsers, \u2018dark wallets\u2019 and \u2018mixing\u2019 services\u2014to obscure true identities. These developments will continue to cause difficulties for law enforcement and intelligence agencies, which will need to keep up with technological innovations exploited by tech-savvy criminals.<\/p>\n

Nonetheless, Australia\u2019s regulation of digital currency exchanges, and the regulators\u2019 cooperation with the sector, are welcome steps in the ongoing fight against crime.<\/p>\n","protected":false},"excerpt":{"rendered":"

Australia took an important step in countering the criminal use of digital and cryptocurrencies when legislation regulating digital currency exchanges under Australia\u2019s Anti-Money Laundering and Counter-Terrorism Financing (AML\/CTF) Act 2006 came into effect on 3\u00a0April. …<\/p>\n","protected":false},"author":465,"featured_media":39580,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_mi_skip_tracking":false,"footnotes":""},"categories":[1],"tags":[686,2196],"class_list":["post-39579","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-general","tag-bitcoin","tag-digital-currency"],"acf":[],"yoast_head":"\nRegulating digital currencies to fight crime | The Strategist<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" 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