All of us heard many times that cryptocurrencies are only good for trading in the darknet and for laundering money. We sometimes even get requests from journalists to give comments on such questions about illegal deals with cryptocurrencies.
But let’s sort out, can bitcoin be really used for money laundering?
I think there is no need to explain what money laundering is about – it is done to give criminal money legal status and to “cover the tracks”.
Cryptocurrency sphere with its decentralization, anonymity and almost instant transactions may seem to have become the favorite place for all kinds of financial fraudsters. But there are a few problems with that.
1. Volatility of most cryptocurrencies
Although for traders constant price surges serve as a great opportunity to profit, for people using digital currencies as a medium, a fall by 10-20 per cent can be a very serious risk.
2. Difficulty of converting cryptocurrencies into fiat currencies. More and more often the exchangers and exchange markets follow the principles of KYC, CFT and AML. Cryptocurrencies still have a half-legal status in most countries. If a considerable amount of money is transferred into cryptocurrencies, after all the stages of laundering, these cryptocurrencies will need to be transferred back into cash money. That’s how, ironically, half-legal status of cryptocurrencies protects them from criminal activity.
3. The majority of digital currencies are not at all anonymous. All transactions made in blockchain are reflected in a public ledger, where everybody can track from which account the transaction was made, how much money was transferred, and by which account it was received. No, these accounts are not connected to names and surnames, but these are easily trackable by IP. There is a limited number of currencies the main task of which is totally anonymity of transactions (Monero, Zcash, Verge and others). But the result of this anonymity is, as a rule, longer time of transaction and its higher price, and difficulty of conversion due to lower liquidity.
It cannot be absolutely excluded that bitcoin might be used in illegal deals, as any currency in the world, in cash or in a cashless way. But incredibly much more often it is the cash, in particular, dollars, which is used when financing terrorism of laundering money, but the very thought of banning cash sounds absurd.
Notwithstanding all the novelty that comes with cryptocurrencies, the most anonymous and safe way of transaction is giving money from hand to hand. That is why the majority of illegal deals are done with the use of cash. As before, using cash remains more anonymous and complicated for tracking than most of cryptocurrencies.
And what do you think? Do you believe that cryptocurrency is only good for illegal deals?