A common and prolific criticism of cryptocurrencies is their vulnerability and susceptibility to cyber corruption. There is good reason behind this concern, too; just this week, Europol director Rob Wainwright pronounced that there has been a significant increase in cybercrime of this nature. He estimated that around 4% of all criminal proceeds are now being turned into cryptocurrencies because they aid the obscuring of evidence. Money that has been converted into currencies which governments already find difficult to regulate is naturally easier to keep under wraps for criminals. Once criminal money is used in untraceable transactions involving cryptocurrencies, the means of locating and retrieving the stolen goods becomes highly complicated and protracted.
Take this everyday example as a warning: if you were to have money stolen from your bank account, your bank would take steps to help you retrieve the money. As stressful as the realisation of your losses may be at first, the police have the technology to track such crimes and banks are often more than willing to refund the money and even freeze your bank account in extreme circumstances. If this money were to be transferred into cryptocurrencies, however, the solution may not be so simple. Wainwright observed that ‘police cannot monitor those transactions’ in the same way they survey regular ones, as ‘they have no way to freeze the assets unlike in the regular banking system.’ The lack of a central regulatory authority is the fundamental flaw in this system. When it comes to regulation and consumer protection, external authorities can do little to resolve security issues when there are no internal officials at the core.
These figures reported by Europol are from Europe alone. With an estimated £100 billion of illegal money being circulated in and around the content, it is likely that around £4 billion of that is in cryptocurrencies. This, of course, does not account for the global impact of this new crime wave. With countries such as South Korea and Japan taking steps to impose regulations on transacting with cryptocurrencies, the global impact of laundering of this nature is clearly anticipated.
The issue going forward, and the question becoming increasingly urgent for legal authorities, is how to come to a workable compromise with cryptocurrencies. Clearly they are here to stay, and in an age where consumers are depending on the internet for more commercial transactions than ever, it would be impractical to try and override the progression of cryptocurrencies into our economy. It is not unreasonable to predict that, with the right regulation, cryptocurrencies could be a feature of our daily commercial landscape in the near future. The task of finding a feasible and legal way to integrate them into our current financial systems, though, will be the biggest barrier to bitcoin and its lesser known siblings making their way onto our regular stock markets.
Image: [Forex Markets Live]