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.


Egypt’s sovereign wealth fund to raise authorized capital five-fold up to $62.15 billion

Updated 12 November 2019

Egypt’s sovereign wealth fund to raise authorized capital five-fold up to $62.15 billion

  • Egypt’s parliament passed a law allotting 5 billion Egyptian pounds of start-up capital for the fund last year
  • Abdel-Fattah El-Sisi: Egypt could dramatically expand the size of its new sovereign wealth fund to ‘more than several trillion pounds’

CAIRO: Egypt’s sovereign wealth fund is expected to increase its authorized capital to up to a trillion Egyptian pounds ($62.15 billion) from 200 billion pounds within three years, depending on investors’ appetite, the fund’s executive director said.
Last year, Egypt’s parliament passed a law allotting 5 billion Egyptian pounds of start-up capital for the fund, called the Egypt Fund, with 1 billion pounds to be transferred immediately from the treasury.
The law also allows the president, who picks the board of directors, to transfer the ownership of any unused state assists to the fund or to any of the fund’s assists or companies.
“We expect to increase our licensed capital within three years to a trillion pounds or less ... it all depends on the investors’ response and investment appetite,” said Ayman Soliman, the fund’s chief executive.
“The sectors we will work in include industry, traditional and renewable energy, tourism and archaeology,” Soliman said.
President Abdel-Fattah El-Sisi said last month that Egypt could dramatically expand the size of its new sovereign wealth fund to “more than several trillion pounds,” and that it “aims to contribute to sustainable economic development through management of its funds and assets.”
The fund plans to buy a stake of about 30 percent in power plants built by Siemens, Soliman said, adding that six international investors have expressed interest.
“So far, six companies submitted offers to the Electricity Holding company to buy shares in the Siemens power plant,” Soliman said.
The plants, billed at the time as the world’s biggest, were built by Siemens in a €6 billion ($6.61 billion) deal signed in 2015. El-Sisi inaugurated them last year.
In May, Electricity Minister Mohamed Shaker said that the government is considering selling the power plants to private investors, but talks were still at an early stage.