Bitcoin crime crackdown just another buying opportunity

The UK government and the European Union are planning to introduce strict measures to counter money-laundering, due to fears that criminals are turning to cryptocurrencies in greater numbers.

A spokesperson at HM Treasury, said: “We have clear tax rules for people who use cryptocurrencies, and like all tax rules, these are kept under review. We also intend to update regulation to bring virtual currency exchange platforms into anti-money laundering and counter-terrorist financing regulation.”

According to reports, the new rules could come in as soon as this year or early next.

Bitcoin fell to $10,600 on the news but quickly recovered. It reached an all-time high of $11,800 over the weekend and is currently trading at $11,286 on the Coindesk bitcoin price index, which takes prices from a number of exchanges.

Greater regulation is in fact welcomed by most market participants. The more established exchanges already have Anti money-laundering (AML) and Know Your Customer (KYC) processes in place, although some only apply their rules to customers conducting high value transactions.

Last week cross-border policing body Europol uncovered criminal networks involved in laundering £27 million worth of cash through 1,719 cryptocurrency transactions.

Also, the Metropolitan police reported last week that London’s drug gangs are using Bitcoin ATMs to launder money. Although ATMs tend to have higher fees than buying through an exchange, they are convenient to use and no identification is required. Users just need to have a digital wallet, scan its QR code at the machine and then feed in the notes.

Detective Inspector Tim Court from the Met’s fraud squad, pointed to the problem: “It’s a great opportunity for them to dispose of cash quickly. You can shift it across borders, send it anywhere in the world to buy commodities.”

John Mann MP, a member of the House of Common Treasury Committee. told the Daily Telegraph: “These new forms of exchange are expanding rapidly and we’ve got to make sure we don’t get left behind – that’s particularly important in terms of money laundering, terrorism or pure theft.”

With an appreciation of the speed technology moves, and in the crypto world in particular, as compared with the legislative timescales of governments and states, he continued:

“It would be timely to have a proper look at what this means. It may be that we want speed up our use of these kinds of thing in this country, but that makes it all the more important that we don’t have a regulatory lag.”

Elsewhere, the government of Venezuela, according to a statement by president Nicolas Maduro, is planning to introduce a cryptocurrency, to overcome what he describes as the “financial blockade” of the country. The currency would be backed by commodity reserves, which in Venezuela’s primarily means oil but also gold, diamonds and natural gas.

Early adopters of bitcoin, the Winklevoss twins, Cameron and Tyler, have seen their initial investment of $11 million at a buying price of $120 back in April 2013, mushroom to around $1 billion.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.