Bitcoin is a digital currency that exists almost entirely in the virtual world with a growing number of followers using it to pay for goods and services. According to Forbes, Bitcoin was set up in 2009 by a mysterious individual or group with the pseudonym Satoshi Nakamoto, whose true identity is yet to be revealed. It rocketed to prominence in 2013 when the value soared from $22 to a record $266. At its peak, based on more than 10 million bitcoins issued, the cryptocurrency boasted a market value of over $2 billion.
Bitcoins are created, or ‘mined,’ in a unique way. They are generated through automated coding and issued to users as a reward for the use of their computing power. The more Bitcoins are generated in this way the harder it becomes for future coins to be generated. More computing power is needed for each code to be solved and each new coin to be generated. Bitcoins can also be obtained in exchange for cash from digital currency exchanges, and for providing products, and services.
There are several benefits to using Bitcoin
The owner of a Bitcoin is the only person that can change the ownership details, so Bitcoins cannot be stolen unless the thief has physical access to the owner’s computer. Sending and receiving Bitcoins requires users to keep the Bitcoin client running and connected. In doing so, users share the burden of authorising transactions and reduce transaction costs to a negligible level compared with the fees of credit cards and other online payment systems.
Users have the freedom to do what they want with their money as Bitcoins cannot be apprehended or frozen by any government, bank or organisations. These features have made Bitcoin a popular currency for illegal online activity. Last year the FBI shut down the infamous Silk Road website, an online marketplace for illegal products. And, as the popularity of Bitcoin grows, so does the fear that the digital currency will be used for money laundering purposes. Florida has become the first state to file a court case involving money laundering through Bitcoin.
'Dark Wallet' is about to make Bitcoin Money Laundering easier than ever
Recently, a collective of politically radical coders - including the creator of the first 3D printed gun - revealed plans to release an application called Dark Wallet: a Bitcoin transfer tool designed to protect its users’ identities far better than the ever before. If the program delivers as promised, it could circumvent impending Bitcoin regulations seeking to tie Bitcoin ownership to individuals. By encrypting and mixing its users’ payments, Dark Wallet seeks to enable practically untraceable flows of money online. The creators of Dark Wallet have been explicit in their intentions saying that they want to create a private means for black market transactions and even going as far as stating that “it’s just money laundering software.”
Government regulation of Bitcoin seems inevitable and, although the Money Laundering Regulations 2007 have a wide scope and apply to a number of different business sectors, technology and online payment systems move forward too quickly for legislation to encompass every development. Criminal enterprises will always try and launder money through new methods of financial transacting and take advantage of legal loopholes. The widespread popularity of these payment systems means that businesses need to be even more vigilant when conducting business online.
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