Bitcoin is wrongly blamed as a go-to vehicle for money-laundering, tax evasion, and criminal activity because the facts do not support these claims. That’s what Canadian cryptocurrency experts said after reviewing the evidence.
One reason for bitcoin’s image problem is the pseudonymity that cryptocurrency transactions afford because the ecosystem is decentralized and largely unregulated. But transactions are not completely anonymous, according to Quebec’s Chief Scientist Office.
Francis Pouliot, the CEO of blockchain startup Catallaxy, excitedly tweeted the findings on April 18, writing:
“Quebec Government Chief Scientist declares that Bitcoin is not used for money-laundering unlike cash and has almost no impact on criminal activity.”
‘Anonymity Of Bitcoin Is A Myth’
Attorney and cryptocurrency specialist Erwan Jonchères agreed with the assessment of Quebec’s Chief Scientist.
“The anonymity of bitcoin is a myth,” Jonchères said. “There is no more transparent money because you have to go through a platform where you have to give personal information. At the very least, [even if a name is fake] we always know the address of the transmitter and that of the receiver.”
Jonathan Hamel, an associate researcher at the Montreal Economic Institute, said the bitcoin economy is based on blockchain technology, which records transaction details on a public ledger. An illegal bitcoin transaction could easily be traced back to the user, he explained.
Crypto experts say bitcoin is not unregulated in Quebec, Canada. (Image: Pixabay)
“Every transaction is transparent and public,” Hamel said. “They are indeed recorded in a kind of ledger whose copies are distributed among thousands of computers.”
IMF Praises Crypto But Calls For Regulation
The declaration by the Quebec Chief Scientist comes amid calls for more regulation by the International Monetary Fund. IMF boss Christine Lagarde praised cryptocurrencies for their efficiency and called the blockchain potentially revolutionary.
However, Lagarde said crypto must first overcome its image as a vehicle for money-laundering and tax evasion before wider adoption can occur.
“The same reason crypto-assets — or what some people call cryptocurrencies — are so appealing is also what makes them dangerous,” Lagarde wrote in a March 2018 blog post, as BTCManager has reported.
She added: “These digital offerings are typically built in a decentralized way and without the need for a central bank. This gives crypto-asset transactions an element of anonymity, much like cash transactions. The result is a potentially major new vehicle for money-laundering and the financing of terrorism.”
With Bitcoin, You Can Run But You Can’t Hide
Meanwhile, attorney Erwan Jonchères said instances of money-laundering and tax evasion in crypto are overblown because all transactions can eventually be traced.
“I think that tax evasion and money-laundering are anecdotal on cryptocurrency networks. Since bitcoin is transparent, it will be very easy to identify all the people trading on an online exchange or portfolio platform.”
A January 2018 report found that less than one percent of all bitcoin activities conducted between 2013 to 2016 involved money-laundering. The study was jointly compiled by blockchain analytics company Elliptic and the Foundation for the Defense of Democracies’ Center of Sanctions and Illicit Finance.
“Bitcoin’s illicit use is mainly based on anecdotal evidence, usually without supporting data analysis of how it is used across geographical regions, or trends over time,” according to the report.
As it is, regulatory crackdowns are already escalating around the world. On April 17, 2018, the New York Attorney General’s Office launched an inquiry into 13 top cryptocurrency exchanges by sending letters to Coinbase, Binance, Bitfinex, Gemini, and others.
The AG’s Office requested detailed information on the exchanges’ operations, internal controls, conflicts of interests, and safeguards to protect customer assets, as BTCManager has reported.
The completed questionnaires are due by May 1. The results should be enlightening for cryptocurrency followers. So stay tuned.