Are cryptos used for illicit activity? Does bitcoin provide any added assistance in committing crimes?
The central bank of the country is all set for its rumoured ban on the cryptocurrency and while experts have repeatedly argued against the move, the regulators have consistently pointed out at how criminals can use cryptocurrencies for illicit activity as their argument to the favour of the decision, amongst others. But really, can bitcoin be used for illegal and criminal activities? And if not, is the prospective ban on cryptocurrency actually a good idea of the company? Well, the most we can do is discuss, so let’s do it.
It is said that when the creator of bitcoin, Satoshi Nakamoto, first created the famous cryptocurrency, they probably had no idea how they opened the gates for the dark web’s favourite cryptocurrency, along with creating the way for other coins for illicit activities. If you don’t get the dark web reference, well, remember the 2013 Silk Road collapse and you’ll understand the hidden corners of internet crimes we’re talking about. “While we have previously reported a small shift towards more privacy-focused cryptocurrencies such as Monero, Bitcoin still remains the currency of choice for both legitimate and criminal use,” reported Europol with its latest assessment of internet-based organised crime back in 2019. Again, the link between cryptocurrency and criminal activities goes a long way and we can’t deny that. But what we’re here to discuss, however, is how the pattern has changed especially after the recent momentum that the currency has gained. Well, let’s credit some success to the name of law enforcement organisations that have proved their worth in significantly reducing the criminal activity associated with the famous currency and we’re here for it. Unlike cash, which is completely traceless and anonymous, blockchain technology is pseudo-anonymous and behaves like an infinite, immutable, data ledger that houses every single cryptocurrency transaction ever made — but it also lets law enforcement agents trace and follow the money. Our focus is on preventing money laundering rather than tracking down criminals,” Robinson said, adding: “To achieve this, we provide tools to businesses such as cryptocurrency exchanges and financial institutions, which allow them to screen cryptocurrency transactions for links to criminal activity.” “By making it harder for criminals to launder their proceeds in cryptocurrency, we help discourage the illicit activity in the first place,” he said. The law enforcement has come a long way since and so has improvement in identification of illicit activities through the currency, which again has been one of the major concerns of the country’s central bank. We cannot say there’s no criminal activity, of course, but what we can say is that the law enforcement systems today are stronger than ever.
The government is due to introduce a bill called “The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021” that is aimed to prohibit the use of “all private cryptocurrencies” in the country and there are speculations about cryptocurrency ban in India. The proposed ban will criminalise the possession, mining, trading or transferring of cryptocurrency assets. Offenders could face up to 10 years in jail & fines. As a result, it becomes important to discuss if the move is a good idea, and by the looks of it, it is not. Even though this is not the country’s first attempt at controlling currency, this time, however the economic situations are likely to make the ban a lot less likely to succeed. It is because the system behind bitcoin makes it explicitly hard to locate password or seed phrase holding millions in bitcoin. Nor can the government seize or even access the network of computers scattered across the world mining cryptocurrency and maintaining blockchain ledgers. To enforce a ban, authorities would have to develop an intrusive surveillance system that could track all digital and internet activity in the country. Let’s just suffice to say India does not have the state capacity to pull that off. To say the least, it’ll only drive down the cryptocurrency market underground and we all know how that goes with the country’s lousy systems and arbitrary rule implementations. For the ordinary people that could actually benefit from the currency? Well, they’ll lose out because the ban would prohibit them from capitalising on the crypto asset’s appreciation. In the words of blockchain evangelist Balaji Srinivasan, “India is about to commit a trillion-dollar mistake.”
And if you think about it, the mistakes are worth when the purpose gets solved. In this, unfortunately, we can’t say it because the actual fear of the government- tax evasion- doesn’t really get addressed with the provision. We all were witnesses of the impact of demonetisation and this ban to curb black money would be no less to say the least. A far better solution would be to streamline India’s complex tax code, broaden the tax base and make enforcement less arbitrary, thus encouraging more Indians to pay what they owe, changes to whom were recently seen for the better. Well, we can hope the pattern continues and the alterations withhold. The government’s second worry is preventing capital flight and volatility during economic crises. Cryptocurrency would allow Indians to bypass the current restrictions on capital account convertibility and invest abroad more easily. But again, protecting Indians from global volatility by banning cryptocurrency would be like making roads safer by eliminating cars. The real long-term solution is for the government to gradually reduce controls over capital mobility and make India a more desirable investment destination. What the future has in store for the currency is yet to be seen but till the government makes its mind, we can certainly hope it makes the right choice.