New government regulation takes aim at bitcoin currency
February 20, 2014
Canada and other countries around the world fight crime and terrorism by monitoring economic activity. That is now becoming more difficult with the creation of a virtual currency known as bitcoin.
Bitcoin came into existence in 2009. It is a form of electronic cash (ecash) that operates differently from conventional currencies that are created by countries.
The Canadian dollar and other sovereign currencies trade with specific rules that are a result of the international co-operation between governments to assist police fighting criminal activity and terrorism.
Criminal activity including organized crime and terrorism leave a paper trail of economic transactions. Strict rules make it harder for criminals to profit from crimes such as the financing of terrorist activities.
There are no such rules with bitcoin. Transactions occur freely between individuals and organizations with no questions asked.
The starting point for any criminal or terrorist activity is to make the money appear legitimate through money laundering. This is done with a series of transactions where the proceeds of crime are transferred into legitimate money or other assets. Funds are then easily moved around without attracting any attention from the authorities.
The recent federal budget announced a crackdown on bitcoin. Our government plans to regulate online currencies. The budget said “it is important to continually improve Canada’s regime to address emerging risks, including virtual currencies, such as bitcoin, that threaten Canada’s international leadership in the fight against money laundering and terrorist financing.”
One week before the budget a Canadian was arrested in Florida for attempting to sell $316,000 in bitcoin currency to an undercover U.S. Secret Service special agent. Previous bitcoin transactions had occurred between the two where the Canadian had advertised to trade bitcoins for cash. He was contacted by the undercover agent and is now the Canadian is facing money laundering charges.
The Canadian was told the funds used to purchase the bitcoins were from the proceeds of crime which was the much publicized theft of credit card information hacked into through the U.S. retailer giant, Target. The arrest came about when the Canadian had been advertising on an online directory where bitcoins can be traded anonymously.
Although the details were not given in the budget, our government wants to be able to monitor online commercial activity just as they do with traditional economic activity.
The underlying issue is about individuals surrendering their privacy by allowing governments to more easily monitor their economic activity. This trend has been going on for many years and most individuals consider it a price to pay for the ultimate protection against crime and terrorism.
People are aware that they are being monitored when they are asked a series of questions about the origin and legitimacy of their wealth when opening accounts at banks or investment firms.
Our government’s decision to regulate and monitor online currencies such as bitcoin is just another step towards helping us as a society protect ourselves against criminal activity and terrorism.