Creating and implementing laws that stop the illegal use of technology has always been an issue. As with every technological advancement, there will always be people whose goal is to use these technologies to inflict crime. And crypto isn’t any different.
Regulatory bodies worldwide have been hard on crypto because of the number of illegal activities people can do with crypto. Whether it is ransomware or funding terrorists or money laundering, crypto, like every technology, can be used for bad things.
Financial regulatory bodies all over the world are worried about crypto because of the crimes being committed through crypto.
Some of these crimes include, but not limited to:
- Dodging international sanctions
- Funding terrorists
- Paying ransomware hackers
With crimes as these, what do you expect these regulators to do?
Although these crimes are not specific to crypto, the novelty of crypto and how decentralised it is makes it worse for regulators to grasp how this new currency and technology works and how to curtail these crimes, if not stop them completely.
Are these regulators looking for ways to restrict its use and spread, right in their anti-crypto campaign?
The answer is yes.
Crypto’s massive adoption over the last few years, with businesses now accepting cryptocurrency for payments of goods and services, is good for the world’s economy.
The growth of cryptocurrency has seen countries like El Salvador make bitcoin an official currency, while some cities such as Miami are creating crypto in their cities’ names. The proverbial sky is the starting point for crypto. Its adoption is spreading fast.
However, there is some negative news associated with crypto.
And this news is doing more harm than good for the cryptocurrency space.
In various countries around the world, financial regulatory bodies are working round the clock to ensure that the spreading fire of cryptocurrency is tamed, and tamed for good. Some politicians have voiced their disapproval of cryptocurrency, fearing its spread will destroy national currencies and open a gate to money launderers and criminals. And this hellish gate, they fear, won’t ever close.
These politicians are right when they fear that criminals will use crypto to perpetrate evil.
COUNTRIES ARE ESCAPING INTERNATIONAL PENALTIES WITH CRYPTO
A Russian oligarch had advised that Russia used digital currencies to evade financial punishment from the USA. Oleg’s advice is some of the reasons international regulators are wary of cryptocurrencies becoming mainstream.
Regulators are also worried because crypto is being used to pay hackers and criminals, through shady, non-compliant crypto exchanges.
Ransomware attacks are not new in cyberspace. What is new, however, is how these attacks are carried out and how they avoid firewalls and internet security measures.
The recent torrent of attacks and their subsequent use of exchanges to move large sums of stolen funds caused the Treasury Department Office of Foreign Assets Control to penalise cryptocurrency exchange Chatex, impounding over $6.1million in crypto from the exchange. It was discovered that the exchange platform helped in moving cryptocurrencies that were used to pay these fraudsters.
While the issue of ransomware isn’t a crypto-specific problem as it has been happening for years, the United States discovered that many of these exchange platforms do not comply with the rules and regulations stated for exchanges. They hide under regularised and compliant trading platforms such as Redot.com, enjoying the speed of these legalised platforms.
Therefore, the USA has been explicitly clear that ransomware attacks are not specific to crypto; it is an internet problem. The Treasury has been deliberate in its actions, only attacking illicit exchanges and trading platforms.
So, other than these attacks, what else are American regulators worried about?
There is a growing fear among regulators that terrorists easily finance terrorism through crypto. They [terrorists] can easily transfer money to finance attacks and training of other terrorists.
The fear of sponsored terrorism was why India banned crypto, and it is also the motivating factor behind Nigeria banning cryptocurrencies too. Of course, bans such as India’s and Nigeria’s led to investors panic-selling.
The fears of sponsored terrorism done through cryptocurrencies isn’t without reason, but there are ways, if blockchain technology is better understood, that government officials and regulatory bodies can track transfers and other crypto-related activities.
Unlike centralised systems where transactions can’t be tracked, cryptocurrency is an open-source system, making it easy to track transactions – knowing which wallets the currencies were transferred from and the wallets they were transferred to.
Fiat currencies are almost impossible to track with the same ease as one can track cryptocurrencies. This is an advantage that digital currencies have over fiat in terms of dealing with financing terrorism.
So, while it is understandable that regulators are worried that criminals transfer funds fast through crypto, cryptocurrency’s open-source system makes it easy to track funds.
Regulators are trying to do their job, we know. But sometimes it feels as though they’re against financial prosperity.
But that isn’t true.
In most cases, these regulatory bodies are still in the dark on how blockchain technology works. Many of them are still grappling with the complex concepts of blockchain and smart contracts and the likes. Being a new technology, it isn’t out of place for regulators to be unsure on how and what to regulate.
Still, there is a dire need for these regulators to learn how to work with cryptocurrencies. Getting a deeper understanding of cryptocurrency and its underlying technology will go a long way in helping regulators make and enforce laws that protect the good ones and fish out the bad ones.
But these regulators need to be willing to learn, and slow to enforce rules on crypto.
In response to the growing fears among regulators that crypto will crumble the economy of the world, many countries, in collaboration with their central banks, are developing Central Bank Digital Currencies.
Many analysts have predicted that CBDCs will be used by countries to dodge international penalties.
For example, China is working on the country’s CBDC. There are fears that if CBDC becomes a reality, it will lessen the power of the U.S Dollar, and help China evade financial penalties in the international financial space.
But the sentiment among some financial analysts is that carrying out international businesses with CBDCs will be harder, as many countries still do business with the U.S Dollars.