New Law Could Threaten Bitcoin
A key feature of bitcoin is under threat and it could shatter the currency’s value. The European Commission is pushing a security bill to drag bitcoin out of the shadows. No more anonymity. (Source: “Here’s Why Europe Is About to Crack Down on Bitcoin Anonymity,” Fortune, February 3, 2016.)
After the terror attacks in Paris, many lawmakers want to close money laundering loopholes. Bitcoin is a digital currency, meaning it offers a discreet channel for illegal financing. A key example is Silk Road, the black market web site best known for buying and selling drugs.
The site processed tens of millions in sales before the FBI got involved. EU officials are trying to prevent terrorists from using the same funding methods. If passed, the law would go into effect by 2017. (Source: “The Rise & Fall of Silk Road,” Wired, April 2015.)
Can Bitcoin Turn Mainstream?
However, keeping track of bitcoin users may prove difficult. If a user acts on an exchange outside Europe, it puts them beyond the reach of the EU Commission. Once they own bitcoins, their peer-to-peer transactions are nearly impossible to follow.
Widespread adoption of bitcoins has yet to happen, but advocates say it is inevitable. Transactions are immediate and without an intermediary, so there are no fees or surcharges. All the currency needs is for more vendors to accept it as a legitimate payment method.
It is unclear whether the proposed legislation would aid in achieving that goal. Many bitcoin users are skeptical of data collection by the government. They prize bitcoin’s anonymity as a central facet of the currency’s usefulness. Removing it could be highly controversial.
The EU Commission sought to address those concerns on Wednesday.
“We want to improve the oversight of the many financial means used by terrorists, from cash and cultural artifacts to virtual currencies and anonymous pre-paid cards, while avoiding unnecessary obstacles to the functioning of payments and financial markets for ordinary, law-abiding citizens,” said European Commission Vice President Valdis Dombrovskis. (Source: “Here’s Why Europe Is About to Crack Down on Bitcoin Anonymity,” Fortune, February 3, 2016.)