Let’s set the record straight: Bitcoin isn’t anonymous.
Harder to track?
Can make it tough for anyone to try to trace its originator?
Uh. Ask the imprisoned 31-year-old Ross Ulbricht just how anonymous his beloved digital currency actually is. Of course, that won’t be so easy unless you visit the Metropolitan Correctional Center, the federal prison where he’s currently serving a life sentence for his “anonymous” bitcoin-funded Dark Web drug marketplace.
Still, the somewhat-anonymous nature of bitcoin has plenty of skeptics weary of the digital currency that’s been known to disappear from bitcoin exchanges, been used in ransom case, criminal activity, underground online marketplace, and of course — as PYMNTS dove into in last week’s bitcoin tracker — terrorism ties.
Of course, just how much of the connection bitcoin has to aiding the finances of groups like ISIS is up for debate. But that hasn’t stopped the European Union’s executive body from doing everything in their power to crack down on bitcoin — for multiple reasons.
About time, right?
And sure, there’s the libertarian philosophy behind bitcoin and digital currencies about having the freedom to conduct business without the oversight over government regulation. And while — in theory — that’s all right and well … what does it breed?
And yes, regulating money doesn’t necessarily mean you’re going to sidestep the criminal aspect (there’s plenty of Wall Streeters who’ve had their day in court to prove that theory wrong). But not regulating money has a whole slew of consequences (and that’s even if we’re going to call bitcoin “money”).
And interestingly enough, the reason the EU is finally looking to regulate bitcoin payments is for one simple word that has everyone across the world crippled in fear about: terrorism.
Rightfully so, especially following the Paris attacks in November that sent a chilling reminder, once again, of what the rest of the world was up against. And the EU admitted this fact when it sent out a formal news release about its “action plan to strengthen the fight against terrorism financing.”
The EU’s proposal also reads: “We are setting out actions on three priorities: preventing and tracking financial movements potentially linked to terrorism financing, disrupting the sources of terrorist revenue, and encouraging international cooperation.”
Outside of digital currencies, this also includes better oversight on prepaid cards (that have the same anonymous issue), along with transactions between countries that are deemed “high risk” for terrorism financing. The EU also wants better regulation on tracking suspicious financial transactions, and easier access to tracking bank account activity.
And what the EU stresses is that for “ordinary people” this legislation shouldn’t harm any of their financial activity. This sentence alone makes it clear who their targeted audience is: “Overall, the Action Plan is balanced and avoids unnecessary obstacles to the way payments and financial markets should work for ordinary people.”
Those “ordinary people” it’s referencing are the type of people who aren’t trying to go outside the law to transact with virtual currencies like bitcoin.
Then again, why ordinary people need bitcoin is another matter … but …
“We want to improve the oversight of the many financial means used by terrorists, from cash and cultural artifacts to virtual currencies and anonymous prepaid cards, while avoiding unnecessary obstacles to the functioning of payments and financial markets for ordinary, law-abiding citizens,” said European Commission VP Valdis Dombrovskis.
What the new legislation calls for is for there to be stricter controls over virtual currency platforms, specifically when a person is exchanging bitcoin for physical currency. That, in effect, would make them subject to the EU’s anti-money-laundering laws and would also effectively take a sliver of anonymity out of the picture (in theory). And that could happen by the end of next year once the full proposals are set to go into effect.
But there are limits to such regulation, of course, like the many bitcoin exchanges that operate outside the EU’s footprint. This would be the loophole that it wouldn’t take long for bitcoin enthusiasts — and potentially criminals — to find their ways around.
What’s also interesting about the EU’s regulation discussions is it comes not long after a report was published from the inter-governmental Financial Action Task Force that suggested there wasn’t quite enough evidence to tell how or if terrorists were actually using bitcoin or other digital currencies to support their efforts.
But the report also didn’t rule out the option: “The actual prevalence and level of exploitation of these technologies by terrorist groups and their supporters is not clear at this time and remains an ongoing information gap to be explored,” the report stated.
Either way, the EU is ready to jump in and regulate. And whether or not terrorist groups are actually using bitcoin as a mode to funnel in funding for their operations, wrapping some regulatory tape around bitcoin is probably a pretty good idea. There’s plenty of C-Suite execs in the U.S. financial services market who’d back up that proposition.
And in other bitcoin news …
Bitcoin Tracker: Week 108 | The Top Bitcoin News Of The Week
JPMorgan Chase has officially kicked off its blockchain test project, according to Financial Times.
This step forward by a major bank is part of the financial services industry move to see how blockchain’s tech could bring efficiency and cost-cutting measures to the trading industries. This move is part of the larger initiative from major banks to test where such a technology could impact the financial trading ecosystem.
JPMorgan has also teamed up with Digital Asset Holdings, the startup ran by ex-JPMorgan executive Blythe Masters. The duo is looking to see where blockchain’s tech could be implemented in relation to things like JPMorgan’s loan funding business.
“To sell a loan is a very cumbersome, time-consuming process; settlement can take weeks,” Daniel Pinto, head of JPMorgan’s investment bank, told the Financial Times. “Exploring alternatives through blockchain ‘makes all the sense in the world; it’s easier and faster operationally, and you get fewer mistakes.’”
Loans are a particularly attractive sector of the banking business to explore with blockchain’s tech, Pinto noted, because “the settlement process is complex with lots of manual intervention and multiple parties.”
Just when you thought the Silk Road case couldn’t possibly get any worse than it already has been, the editorial gift that keeps on giving coughs up yet another weird detail.
It seems former Secret Service agent Shaun Bridges has managed to get himself arrested again as he was trying to skip the country before turning himself in on a six-year jail sentence in connection to the Silk Road fiasco for skimming bitcoins from the case.
Bridges already confessed in August to pocketing hundreds of thousands in digital currency while working on the Silk Road case and was sentenced to 71 months in prison. He was scheduled to turn himself in on Friday (Jan. 29) to start serving that sentence, but it seems that perhaps he had some other ideas.
He was arrested in his home last week after he was found in possession of a bag containing his passport, records for offshore accounts, documents for his wife’s non-U.S. citizenship and many, many bulletproof vests.
Yep, sounds like he fit into bitcoin’s list of worst criminals quite well.
New Hampshire has decided it isn’t going to be bitcoin-friendly — at least when it comes to tax payments.
Following a decision that came out of the New Hampshire House of Representatives, the legislative body decided that it would not set the tone for the country by allowing citizens to pay for their taxes in bitcoin. This bill has commonly been referred to as the Bitcoin Tax bill. It was voted down 264-to-74.
What the bill called for was the requirement of the New Hampshire treasurer to “develop an implementation plan for the state to accept bitcoin as payment for taxes and fees.”
Of course, with all the negative rhetoric surrounding bitcoin and its volatility, it may not have come as a shock to many that the government group didn’t want to enable its residents to pay for taxes using the digital currency. The logistics to enable bitcoin could be challenging enough due to its volatile nature and changing value.
The bill was introduced last year by New Hampshire State Representative Eric Schleien who had been working to keep the public updated about the option to embrace bitcoin payments for taxes. We’re just shocked it got 74 votes in favor of doing so, based on the current sentiment toward bitcoin at the moment.
Blythe Masters and her blockchain aren’t the only ones getting funding attention.
Blockstream, a bitcoin-based blockchain startup, has secured what’s believed to be one of the biggest funding rounds of its type in the digital currency space. The company announced yesterday this weekt it has raised $55 million in Series A funding in order to bring what it calls its “next-generation blockchain innovation” to market using its sidechain technology. It also plans to use the new funding to expand globally and support its industry partners.
“Blockchain technology is redefining what is possible within the FinTech ecosystem and beyond,” said Frances Kang from Horizons Ventures. “The transition to this new world — one that is decentralized, interoperable, secure and trustworthy — is going to be illuminating. We are excited to be working with Blockstream to see their innovative sidechain technology reach its full potential.”