Black Money: Does Bitcoin Make Life Lighter for Criminals, The Market Mogul

Black Money: Does Bitcoin Make Life Easier for Criminals, The Market Mogul

7 zoogmoeder read / May 31, 2018

Bitcoin, the most widely known cryptocurrency, has bot a media sensation and an investment fad recently, reaching highs of $Two,000 vanaf bitcoin. However, for all of bitcoin’s potential for financial good, it lends itself well to illicit goals. It can be a implement for cycling black money and money laundering.

Simply waterput, the technological innovation of cryptocurrency, accompanied by its positive attributes, has ushered te a “dark side” ter which its most fundamental idiosyncrasies – speed, secure transfer and value with limited individual gegevens exposure – are exploited by hackers and criminals to secure illicit objectives and carry out cybercrime. Most notably, bitcoin can be used to trade ter illegal substances, weaponry and cycle black money, which is, ‘money that is earned through any illegal activity managed by country regulations..’

Bitcoin imposes no obligation on users to verify their identity, operating without charge and without any centralised vetting proces. There is no requirement of proof of identity, legal name or address. There is no central oversight and no third party to secure transactions spil it is an entirely peer to peer system. Consequently, it lends itself well to users who need to make transactions without trusting the other side.

The lack of a central intermediary means it is less amenable to regulatory oversight than other forms of payment. Further, bitcoin does not restrict the sales of items spil compared to credit cards, which can restrict types of sale ter certain instances. Lastly, bitcoin payments are irreversible, spil the system does not grant an avenue for a payer to switch sides an accidental or unwanted purchase.

Crime and Bitcoin

With bitcoin came the capability to conduct several types of crime: bitcoin-specific crime, bitcoin facilitated crime and money laundering. Bitcoin can suffer from attacks to its infrastructure, such spil theft and denial of service attacks aimed at influencing the exchange rate of the currency.

The lack of central authority presents law enforcement agencies with difficulties due to the novelty of the situation such spil: what jurisdiction is responsible, the technical complexity spil well spil the extent of the crime. Bitcoin can also be used to facilitate crime, most notably ter its use spil payment for unlawful services, from illegal goods to extortion.

Criminals are perhaps drawn to bitcoin due to the lack of authoritative oversight from a central figure, the irreversible transactions or the anonymity it provides. This can facilitate money laundering, spil users can utilise numerous accounts to increase the difficulty of tracing funds on the ledger, thus whilst the ledger is visible publicly, there could be an underlying set of records hidden from law enforcement on the criminal’s side of operations

This can facilitate money laundering, spil users can utilise numerous accounts to increase the difficulty of tracing funds on the ledger, thus whilst the ledger is visible publicly, there could be an underlying set of records hidden from law enforcement on the criminal’s side of operations

Moreover, one could seek to use bitcoin spil a device for tax evasion. With no central banking system, users are anonymous, and thus it is very effortless to not report individual income ter bitcoin on an individual level, facilitating people’s activity ter the shadow economy.

This presents a growing punt because unless someone voluntarily reports their income, there is no way of knowing if income is taxable and this growing ‘freelance economy’ may prove very hard to track if they begin transacting te bitcoin. However, the risk for bitcoin to be used on a large scale is low, spil Princeton’s Edward Felten commented te a panel discussion te 2014, ‘The conspiracy to not report income has to be too large te a sizeable company, and the consequences of getting caught [for] the leaders are too large.’

On the other forearm, bitcoin can also facilitate tax havens. Traditionally, Governments have defeated tax havens by working with foreign states to target linksaf inbetween institutions. Yet, bitcoin undermines the modern process through a series of anonymised, private transactions. A series of transactions that mix the bitcoins from input to output through a series of exchanges can pauze the verbinding inbetween the two addresses. Whilst bitcoin presently is too volatile to reliably conduct such an exercise on a large scale, the potential very much remains.

Silk Road: An Example of Black Market Usage

Silk Road wasgoed a famous online black market, renowned spil a podium for selling drugs. The webpagina used a combination of technologies, including bitcoin, to protect the identity of high-value sellers, whereas buyers had to provide a physical shipping address for the services or product.This meant that should law enforcement officials infiltrate the webpagina, there wasgoed very little chance of identifying sellers.

Further, the webpagina wasgoed also run spil a TOR hidden service on the dark web, meaning that ‘outsiders’ would be incapable to trace the IP addresses of users or of the webpagina itself. Eventually, through a series of mistakes by the site’s founder and technicus, the FBI closed down the market and seized some 144,000 bitcoins, worth $28.5m.

This case serves spil an exercise to display that if the human mistakes bot liquidated, bitcoin and the underlying webpagina would have remained downright capable of hiding the identities of the users.

Double-Edged Sword?

The paradox of bitcoin is that, whilst providing a pseudonymous system for transactions, it also leaves all transactional history ter a publicly visible ledger, thus providing anonymity users need with an un-editable, total transactional history. This is a publicly available paper trail. Sarah Meiklejohn, a laptop scientist at University Collegium London, offers a helpful analogy:

“If you catch a dealer with drugs and contant on the street, you’ve caught them committing one crime, but if you catch people using something like Silk Road, you’ve uncovered their entire criminal history.”

The traceability and permanence of bitcoin are what can give law enforcement an edge. Should an investigator detect the address of a suspect, they have the entire transactional record te vooraanzicht of them, without a subpoena. Additionally, the ledger is ‘borderless’ and not subject to jurisdictional boundaries, relieving the investigator of the task of going through foreign governments.

Furthermore, should one want to exchange bitcoin into another currency, they will ultimately leave a trail when switching into fiat currency. Whilst users could have numerous bitcoin accounts, their capability to have a large roster of bankgebouw accounts is substantially limited. Moreover, canap records can be retrieved through a subpoena.

Regulatory Options

The key challenge for regulators is where to impose constraints. Firstly, it is an insurmountable challenge to attempt to regulate all bitcoin users ter the network due to the quantity, geographic distribution and nature of the peer to peer system.

Ter this sense, regulators would be drawn to moderating intermediaries due to the volume of users going through them. However, this could lead to users avoiding such intermediaries or routeing funds through other accounts to prevent detection. Additionally, the lack of a central figure regulating bitcoin increases the difficulty of this exercise.

Yet the entirely online system facilitates a somewhat lighter way to regulate stolen funds, for example. Offline, it is difficult to avoid stolen or forged currencies injecting circulation, yet, with bitcoin, the funds cannot be forged and the ledgers provide and un-tampered history of transactions, permitting authorities to trace the funds, albeit with the difficulties discussed above.

The Crux of the Matter

Bitcoin and blockchain undoubtedly brought a fresh age of economics and innovation to the table, but, spil with every technological development, there are individuals that would seek to subvert the advancements for their own build up. Spil shown above, bitcoin, and cryptocurrencies, te general, can be used spil a device to cycle black money, avoid tax and pursue illicit goals due to the anonymity the system provides.

Yet, spil identified, this is also a double-edged sword spil the publicly available ledger provides a total, unalterable history of a user’s transactions. This technology, along with its potential te elections, Ten has yet to be fully understood.

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