Crypto-currencies and criminality: myth or reality?

Smartphone with Bitcoin on-screen among piles of Bitcoins.(Shutterstock ilustration image)
Updated 03 November 2019

Crypto-currencies and criminality: myth or reality?

  • A Chainalysis report published in January said that in 2018, one percent of Bitcoin transactions — the most widely used cryptocurrency — involved illegal activities

LONDON: The recent bust of a worldwide international paedophile ring using Bitcoin payments highlighted one of the key fears surrounding crypto-currencies — their use by criminals.
Social networking giant Facebook is keen to get in on the act by launching a digital currency called Libra.
But US Treasury Secretary Steven Mnuchin has aired his ongoing opposition to the move, saying many concerns remained unresolved, including “the issue of money laundering.”
Despite tighter regulations and increased vigilance by the authorities, illegal activities related to virtual currencies remained “significant,” Madeleine Kennedy, from the research firm Chainalysis, told AFP.
A Chainalysis report published in January said that in 2018, one percent of Bitcoin transactions — the most widely used cryptocurrency — involved illegal activities.
The equivalent of $600 million was also spent using Bitcoins on the dark web, a set of hidden networks where a multitude of illicit products, including weapons and drugs, are traded.
In comparison, the global turnover of drug trafficking is estimated at several hundred billion dollars.
Kennedy believes the use of Bitcoins for criminal purposes was partly based on a “misunderstanding.”
The confidentiality reputation of the most famous cryptocurrency is unrivaled, with all transactions recorded in an unforgeable public ledger, the blockchain.
But it is “more transparent than some traditional financial systems and certainly more than cash,” she added.
The British and US authorities last week announced more than 300 arrests in 38 countries as part of an investigation that led to the dismantling of an unprecedented child pornography ring.
Investigators analyzed the blockchain and succeeded in “de-anonymizing Bitcoin transactions,” according to Ron Fort, the head of criminal investigations in the US tax services.
But if Bitcoin is still the reference currency for criminals because of its popularity, they are turning to less transparent alternatives, such as Monero, which began life in in 2014, according to the European law enforcement agency Europol.
Monero’s users can remain anonymous until they need to interact with a cryptomarketing platform or invest their funds with a “wallet” — the equivalent of an account for virtual currencies.
It is phenomenon that also worries the German finance ministry, which recently published a document warning that anonymous cryptos could become “a real alternative to Bitcoin.”
Monero, whose capitalization is still 160 times lower than Bitcoin, uses a complex architecture that makes transactions “much more difficult to track,” said Kennedy.
“But no more than the many shell companies in the many tax havens,” said Emilien Bernard-Alzias, a lawyer at Simmons & Simmons, a specialist in financial markets.
“We have always seen both legal and technical arrangements to conceal money transfers from the courts,” he told AFP, adding that only cash can be considered “perfectly untraceable.”
Also, since Monero does not allow large quantities of money to be bought, criminals are encouraged to convert their funds and must therefore use service providers subject to anti-money laundering regulations.
Unlike currencies that have made anonymity a marketing feature, Facebook has repeatedly said in recent months that Libra will be transparent and comply with the authorities’ requirements.
Libra “will clearly not be ideal for laundering dirty money,” said Bernard-Alzias, although it will probably need to use blockchain analysts “to satisfy regulators,” added Kennedy.


Make or break days for global oil ahead of OPEC crunch meeting

Updated 08 April 2020

Make or break days for global oil ahead of OPEC crunch meeting

  • OPEC, led by Saudi Arabia, were on Thursday scheduled to take part in virtual discussions with non-OPEC members, led by Russia, about a possible deal to revive the OPEC+ alliance
  • On Friday, energy ministers from the G20 nations, under the presidency of Saudi Arabia, will convene in another digital forum that will bring in the third part of the global oil equation – the US

DUBAI: The global energy world, in the midst of crisis as demand slumps to unprecedented levels due to the coronavirus disease (COVID-19) pandemic, faces two days that could make – or break – the oil industry for months to come.
Leading producers from the Organization of the Petroleum Exporting Countries (OPEC), led by Saudi Arabia, were on Thursday scheduled to take part in virtual discussions with non-OPEC members, led by Russia, about a possible deal to revive the OPEC+ alliance that fell apart in Vienna at the beginning of last month.
Then, on Friday, energy ministers from the G20 nations, under the presidency of Saudi Arabia, will convene in another digital forum that will bring in the third important part of the global oil equation – the US, currently the biggest oil producer in the world.
If no deal is reached from the two days of oil summits, the immediate prospect looms of a further fall in crude prices and, with global storage facilities already filling rapidly, the possibility of major exporters “shutting in” oil fields, jeopardizing future production.
Energy experts say the purpose of the meetings is two-fold: To reach agreement on how to limit the vast quantities of oil that are still being produced even as demand collapses; and to present some kind of united front in geopolitical terms in the face of the biggest economic recession since the 1930s.
The most visible immediate sign of any success from the meetings will be an increase in the price of crude oil on global markets. Brent crude, the Middle East benchmark, has lost nearly half its value in the past month.
The first aim – to try to balance oil supply and demand – is the more difficult. Global demand has fallen by at least 20 per cent from the usual daily consumption of around 100 million barrels, oil economists have calculated.
But, following the collapse of the OPEC+ deal that was putting a lid on supply, all producers have been pumping more crude. Saudi Arabia is producing more than 12 million barrels per day (bpd), a bigger volume than at any time in its history. All OPEC members, as well as Russia, have said they will increase output.
In this stand-off, US President Donald Trump intervened last week to say that he had spoken to Saudi and Russian leaders and that he “expected” a cut of 10 million, possibly even 15 million, bpd.
That looks like wishful thinking. For one thing, it would not rebalance markets. Anas Al-Hajji, managing partner of US-based Energy Outlook Advisers, said: “The amount of the cut is relatively small given the major drop in demand.”
There are also some difficult relationships to smooth over in the OPEC+ alliance. Saudi Arabia and Russia exchanged angry statements last weekend, each accusing the other of starting the oil price war. Iran, with big reserves but hampered by US sanctions from exporting in large quantities, said that it might not take part in the conference.
The choreography of the two meetings also presents hurdles. The US will not be present at the OPEC+ meeting, but American Secretary of Energy Dan Brouillette said he would take part in the G20 event.
Because it is a free-market industry, America cannot order its oil producers to reduce output, but most analysts are agreed any attempt to rebalance global supply would be impossible without a US contribution.
By going first, Saudi Arabia and Russia are “playing blind” without knowing what the Americans are thinking. Neither would want to agree big price-restoring cuts only for US producers – under big financial pressure at current levels – to swoop back into the market.
This week there have been some signs that the Americans are considering their own versions of cutbacks. The biggest US company, Exxon Mobil, said it would reduce capital expenditure on future projects by 30 percent; the US Energy Information Administration said oil production would fall by nearly 1 million bpd this year, in response to falling demand and financial pressures.
But even if the Saudis and Russians cut substantially alongside other big OPEC producers such as the UAE, and the Americans enter a long-term pattern of falling demand, it is still hard to see how cuts could reach the 10 million barrels Trump “expects,” let alone 15 million.
J. P. Morgan, the big US investment bank, said that it expects OPEC+ to come up with combined cuts of about 4.3 million barrels, most of that coming from Saudi Arabia, Russia and the UAE. “If it’s 4.3 million it only puts off the day when global storage gets filled completely,” said Robin Mills, CEO of Qamar Energy consultancy.
Storage facilities are nearly at the brim. Malek Azizeh, director of the premium facilities at the Fujairah Oil Terminal in the UAE, joked that he was going to hang a sign on the terminal gates: “Thanks, but no tanks.”