Is Bitcoin Becoming Safer to Use?
- Posted by: ebacrypto
- Category: Blockchain, Compliance, Cryptocurrency
With the recent £187bn anti-money laundering scandal surrounding Denmark’s biggest lender, Danske Bank, is there a cause for concern within the cryptocurrency industry?
We think not.
Especially when it comes to bitcoin.
Change is coming
Cryptocurrency has significantly evolved in the past year, going from strength to strength. However, certain cases like the WannaCry cyberattack have forced the industry to rethink the way it regulates and operates the digital currency on a day-to-day basis.
For instance, in the WannaCry cyberattack, criminals were able to use bitcoin to collect ransoms with ease in exchange for the data they had hacked. This could all be completed by the criminals without having to reveal their true identities.
As a result, governments have started to introduce stricter regulations like Know Your Customer (KYC), which encourages businesses to lawfully check the identity of an entity before they carry out a transaction.
The only issue is, the regulatory process is still in its relatively early stages. So, there isn’t a mutual agreement or overall consensus that safeguards cryptocurrencies like bitcoin.
Although, there is one extremely positive factor which is deterring a lot of criminals from bitcoin altogether. While bitcoin users can withhold their identities during a transaction, they are unable to avoid revealing other important information in the process.
You see, every transaction that’s made using bitcoin is recorded on the blockchain – a public record of all transactions made.
That’s where Chainalysis comes in. This company helps develop software tools made specifically to analyse blockchain data.
In layman’s terms, Chainalysis can identify bitcoin users via the unique strings of numbers they use on the blockchain – otherwise known as addresses. They can then locate and see how that specific user has been moving funds around.
This tool is proving essential to investigators who are looking to hunt down cyber criminals.
It’s already been utilised by the U.S. Federal Bureau of Investigation, the Securities and Exchange Commission, Immigration and Customs Enforcement and Europol.
What’s more, the government is starting to look into using this tool to successfully track the flow of funds on the blockchain to establish whether a business that’s accepting bitcoin is reporting it or declaring it via their tax return.
Cryptocurrency exchanges are also starting to use analytics companies too, due to their inability to guarantee the identity of the person or entity opening an account.
However, if governments and investigators are able to see which criminals are using certain exchanges, they’ll be able to shut them down quicker and inform the exchanges about the threat they are dealing with.
The future of bitcoin
Despite the incredible opportunities bitcoin presents and the introduction of Chainalysis, cyber-criminals are always finding new ways to carry out unlawful actions.
For example, some of the hackers behind WannaCry were able to convert a fraction of their ransom pay-outs from bitcoin to Monero before investigators could identify and blacklist their address.
Is this a cause for concern? Here at EBA Crypto, we don’t think so. If anything, it just underlines the importance of implementing the right procedures to safeguard your best interests.
To learn how to do this, get in touch with our team here.