Money Laundering Through Bitcoin: The Emerging Implications of Technological Advancement.

Abstract

Bitcoin, conceived by the pseudonymous software developer Satoshi Nakomoto, is the world’s first cryptocurrency. This invention of peer-to-peer electronic cash has trigerred a series of apprehension in the financial world. The fact that it has enabled alternative means of transacting to conventional banking has steered a new source of stress within the financial arena. Bitcoin, in terms of technology and currency, has been defined in many ways. Albeit Paul Vigna and Michael Casey describe it as borderless, pseudo-anonymous, decentralised, and outside of regulatory monetary systems, other researches also suggest that these attributes potentially give rise for criminals to evade law enforcement. The focal point of this paper is to provide an insight on the emergence of illicit financial crimes particularly through money laundering, caused by the increasing use of bitcoins. The research paper explicates on two very common ways for “bitcoin laundering” namely: either through bitcoin mixes or bitcoin exchanges or by using both methods. The risk of money laundering is facilitated by the anonymous feature of bitcoin especially when coupled with sophisticated money laundering services, also known as bitcoin mixing, provided on the Darknet. The second strategy of cashing-out dirty bitcoin through bitcoin exchanges unfolds the issue of regulated and unregulated bitcoin exchanges businesses. The other issue with bitcoin exchanges is that they have now turned to a new shadow banking system of doing off-chain transactions on behalf of their customers to outsiders without any regulations in place. The process of laundering money through bitcoin has become easier and accessible to a greater audience, especially when existing laws are not being applied appropriately. In this context, this paper is of the view that the European Union is the best platform to study cybercrimes, especially crimes related to bitcoin. This paper shall discuss the existing legal and regulatory frameworks provided by the European Union to curb cybercrimes but also, by illustrating the attempts (and the lack of attempts) made by the English and German governments to regulate risks of cybercrimes posed by cryptocurrency.