Is terrorism just an excuse for the EU to tighten regulation of Bitcoin?

The EU law enforcement agency Europol has stated in its recent report that the use of Bitcoin in financing terrorist activities has not been proven.

“While third-party reports suggest that terrorists are using anonymous currencies such as Bitcoin, there is no evidence to support this claim.”

Despite the report’s clear conclusions, another EU bureaucratic body, the European Commission, has just rolled out a package to address “terrorist financing.” It looks like the proposal is more about tightening capital controls than “fighting terrorism,” since digital currency brokers make up only a tiny fraction of the global money transfer economy.

“In order to prevent misuse for money laundering and terrorist financing purposes, the Commission proposes to bring virtual currency trading platforms within the scope of the Anti-Money Laundering Directive so that transactions taking place on these platforms are no longer anonymous,” the European Commission press release states.

The reality is that these exchanges have already implemented KYC/AML requirements, so this regulation is not surprising. Apparently, European regulators do not intend to stop there, and they want to further control cryptocurrency trading. According to EDCAB, the European Commission is preparing a payment services directive in which exchanges and wallet providers must apply for licenses and supervision .

However, Bitcoin is not a good means of anonymous money transfer in essence. All information except the username, including transactions, is public. Therefore, compared with traditional methods, such as cash, criminals are more at risk of using Bitcoin to transfer funds. In Jeremy Millar's view, the monitoring of illegal transactions by the Bitcoin blockchain is even more stringent than the banking system.

Not suitable for money laundering

"It is not easy to connect a Bitcoin transaction to a specific user, but it is possible to connect a transaction to a specific service or group of services, which can then be connected to a regulated exchange or darknet market activity," explained Michael Gronager, CEO of Chainanalysis. He denied finding any blockchain transactions related to terrorism. "Bitcoin is not used for terrorist activities, but several other criminal activities, such as theft of Bitcoin from exchanges, darknet markets, and extortion, do exist."

“Digital cash is much easier to monitor for possible criminal activity than paper cash,” Mr Gronager concluded.

“The anonymity of cryptocurrencies is largely a myth, and the claim that they are primarily used for money laundering is an exaggeration and has no basis. The ability to track past transactions makes virtual currencies very unsuitable for money laundering,” said Siân Jones, founder of EDCAB, at a recent EU Parliamentary Committee hearing on virtual currencies.

As she pointed out, according to data from UNODC and the Financial Action Task Force, the amount of money laundering worldwide in 2009 was approximately $1.6 trillion, accounting for 2.7% of global GDP, while the total market value of all cryptocurrencies is approximately $7 billion. "Detailed data analysis of the Bitcoin blockchain shows that the proportion of money laundering involving virtual currencies is less than one ten-thousandth of that."

“According to a recent Europol report, the €500 note accounts for 30% of the €1 trillion in circulation and, despite not being a common means of payment, the euro is at least 92 times more likely to be used for money laundering than virtual currencies,” said Siân Jones.

Original article: http://cointelegraph.com/news/terrorists-not-using-bitcoin-politicians-want-to-regulate-it-anyway
By Martin Rojko
Translator: Overnight porridge
Source (translation): Babbitt Information (http://www.8btc.com/europol-bitcoin)