Bitcoin and other cryptocurrencies have been accused to fund criminal and terrorist organisations but the fact is every other form of money has also been used for the same purposes. A Europol report found that there was no evidence of terrorists using bitcoin. Ransomware extortionists and hackers prefer cryptocurrencies, other crimes are very rare in bitcoin.
Report from the European Commission to the European Parliament and Council found that the risk of digital currencies being used to finance terrorism is moderately significant (level 2). Low significant (level 1) and very significant (level 4).
Money laundering possibilities are also addressed. Per the report, criminal organizations could use virtual currencies to gain access to ‘clean cash’ while hiding its transaction trail. The report states that so far cases of this happening are “quite rare”, the reason for this being the technical expertise required to use virtual currencies. Moreover, criminals don’t seem to be very interested in using cryptocurrencies like bitcoin and ethereum because of their volatility.
Notably, the report implies that terrorists and criminals aren’t smart enough to properly use digital currencies like bitcoin and ethereum. It reads:
“From a technical point, virtual currencies present some commonalities with e-money but the IT expertise at stake for virtual currencies means that organized crime would have lower capability to use them than e-money which is more widely accepted.”
The report adds that taking into account virtual currencies aren’t regulated in Europe, these are at risk of being misused for terrorist financing and money laundering, despite the lack of cases so far. The threat, as such, may be relevant in the future if nothing is done about it.
The implementation of appropriate Anti-Money Laundering (AML)/Counter-Terrorist Financing (CTF) legal framework, according to the report, will help mitigate the risk, despite being hard to find adequate tools to do so. Given that the sector is still rather new, it is noted that no international cooperation exists, at least yet. It reads:
“The lack of a legal framework is the most important element of vulnerability. In the current situation, VCs providers cannot be monitored and supervised. There are no common rules in the EU to ensure that VCs providers apply AML/CFT requirements.”
It’s noted that there is little evidence that virtual currencies are currently being used for money laundering, or to finance criminal or terrorist organizations. Nevertheless, the report finds the vulnerability as “significant/very significant (level 3/4).”
The European Commission’s report seems to show that criminal organization are, for now, not that interested in virtual currencies, but people in Venezuela, on the other hand, are already using bitcoin and other cryptocurrencies to survive government failures.