Regulation
Crypto-assets, terrorist financing, money laundering and regulation: state of play
Crypto-assets, terrorist financing, money laundering and regulation: state of play
Many continue to question the possibility of a link between illicit transactions, terrorist financing and money laundering, but the numbers speak for themselves.
In 2022, the use of cryptocurrencies for illicit transactions was estimated at more than $20 billion.
There are two schools of thought: those who believe in traceability through blockchain and the realists who know that even the most sophisticated systems can be abused, that criminals are always one step ahead of legislators, and that The smell of money attracts all kinds of things. fraudsters and scammers.
According to cryptocurrency trading simulator Crypto Parrot, the number of new cryptoassets increased by 68.75% between September 2020 and September 2021 and by 28% between 2023 and 2024.
The debates on Bitcoin – and more generally on crypto-assets – have their origins in the unease felt by traditional financial circuits and regulators. Lively discussions on this subject will therefore continue for some time.
The untraceable nature of cryptocurrencies makes them ideal for cybercrime activities such as drug trafficking, child pornography and terrorist financing. Cryptocurrencies are indeed omnipresent on the darknet, where they facilitate untraceable payments intended for cybercrime.
The Financial Action Task Force considers that the most significant risks of money laundering and terrorist financing concern the conversion interfaces between cryptocurrencies and legal tender, highlighting the need to regulate these platforms. exchange and other conversion intermediaries that facilitate money laundering.
In 2018, the Banque de France published a note entitled “The emergence of Bitcoin and other crypto-assets: issues, risks and prospects”, which specified that “regulation of activities on crypto-assets is recommended for four main reasons. These are: the fight against money laundering and the financing of terrorism, which constitutes the highest priority; investor protection; maintain market integrity in light of cyber risk; and finally, if these activities continue to develop, concerns about financial stability.
In summary, the Banque de France and the Prudential Control and Resolution Authority recommend broader supervision of services associated with crypto-assets in order to regulate the services provided at the interface between the real world and crypto-assets and to monitor investments in cryptoassets. assets. The position of the French authorities thus amounts to integrating and regulating crypto-assets rather than banning them.
Europe recently introduced regulation of crypto-asset markets, which will establish a legal framework for Bitcoin in all member states from the end of 2024.
Previously, in response to the ever-increasing role of cryptocurrencies in cybercrime, the European Parliament passed its first piece of legislation to trace transfers of cryptoassets like Bitcoin and e-money tokens in April 2023.
The legislation, which was provisionally approved by negotiators in June 2022, “aims to ensure that crypto transfers, as is the case with any other financial transaction, can always be traced and suspicious transactions blocked,” according to a statement press release of the European Parliament.
This regulation covers transparency, disclosure, authorization and monitoring of transactions.
In February, the U.S. Department of Justice announced charges of terrorism, sanctions evasion, fraud and money laundering against seven key figures in an oil laundering network linked to the Iranian government, the main oil supplier from China, Russia and Syria.
Circumventing these indictments and embargoes has been facilitated, at least in part, through the use of crypto-assets.
Iran has enthusiastically embraced cryptocurrency mining, at times exceeding its national energy capacity and leading to temporary shutdowns of mining operations.
This is what caught the attention of Senator Elizabeth Warren of Massachusetts, a cryptocurrency expert and vocal critic of the widespread use of Bitcoin in the United States. She addressed the issue with a bill known as the “Digital Asset Anti-Money Laundering Act” in December 2023, designed to crack down on the use of cryptocurrencies in the United States.
In a letter to the Department of Defense and the Department of Treasury in May, Warren highlighted the risks of legalizing crypto mining in Iran. This practice allowed the transfer of substantial funds to finance both the country’s administration and Hamas.
In fact, Hamas has had the accounts of some of its members frozen by the Israeli government on the Binance platform, currently the world’s leading crypto platform. According to the Wall Street Journal, Hamas amassed more than $41 million in cryptocurrency between August 2021 and June 2023.
According to a 2021 Iranian report, the government in Tehran could generate $2 million per day and $700 million per year in direct revenue from cryptocurrencies.
There is an old Arabic saying that you should chase a thief to the door of his house. And unsurprisingly, when we attack Iranian crypto-assets, we arrive at the doorstep of Hamas, in Yemen, Lebanon and elsewhere.
Lawmakers will continue to address the issue of cryptoasset regulation, which remains a political issue.
How can a country like the United States position itself as a global hub for cryptocurrencies while protecting itself against their misuse and exploitation? How can it regulate extremely high volumes while supporting unrestricted capitalism?
The question is certainly political, but it remains intriguing. However, idealists must give way to pragmatists and political realism.
In any case, they deserve the credit for starting the debate, even if they have not yet found a way to move it forward.
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Nathalie Goulet is a French senator from Orne in Normandy and author of “The ABC of terrorist financing”, published by Cherche-Midi. X: @senator61
Disclaimer: The opinions expressed by the authors in this section are their own and do not necessarily reflect the views of Arab News.