The Stack Archive

EU proposes end of anonymity for Bitcoin and prepaid card users

Tue 2 Feb 2016

In June the European Commission will propose new measures which will effectively end the possibility of staying anonymous while using virtual currencies such as Bitcoin and prepaid credit cards. The mooted legislation is intended to fight the funding of terrorism, in spite of a report from Europol less than a week ago which found no fundamental change in the way terrorism is funded in recent years, or any particular connection with virtual currencies.

The document, released yesterday, also outlines the possibility of undertaking additional monitoring of inter-bank transfers within the European community, which are currently not overseen by the new EU-US Terrorist Financing Tracking Programme (TFTP).

EU Commission Vice President Valdis Dombrovskis comments in the release:

“With today’s Action Plan we are moving swiftly to clamp down on terrorist financing, starting with legislative proposals in the coming months. We must cut offterrorists’ access to funds, enable authorities to better track financial flows to prevent devastating attacks such as those in Paris last year, and ensure that money laundering and terrorist financing is sanctioned in all Member States.

“We want to improve the oversight of the many financial means used by terrorists, from cash and cultural artefacts 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.”

In December the EC proposed a Directive on combatting terrorism [PDF] criminalising terrorist financing techniques, as well as training and travel for terrorist purposes. In May 2015 the EU adopted the Fourth Anti-Money Laundering Package, and the new regulations are intended to bring virtual currencies and prepaid cards – and, in effect, any ‘burner’-style anonymous currency methods – under the terms of that legislation, with full oversight.

The ‘Bitcoin-ban’ will effectively prevent Bitcoin from being turned back into ‘real money’ within the EU, and the primary effect such legislation is likely to have will be in the area of illicit purchases from the ‘dark net’, where users can currently purchase drugs to be posted to an address of their choice from the various outlets that survived the fall of the Silk Road deep web narcotics websites.

France had asked for all this and more, proposing limits on the currently considerable amounts which can be loaded onto pre-paid cards (which are legitimately issued by banks within the EU), and also for limits on the amounts that can be converted from virtual currencies into actual money. Apparently the EC has balked at least at this.

On the 27th January Europol issued a report [PDF] which could not confirm any link between the anonymous payment methods under fire from the EU, noting:

Despite third party reporting suggesting the use of anonymous currencies like Bitcoin by terrorists to finance their activities, this has not been confirmed by law enforcement.’

The UK’s HM Treasury Department also recently pre-empted [PDF] Europol’s findings, quoting a 2014 investigation by the National Crime Agency which concluded that there was ‘little evidence to indicate use by established money laundering specialists or that digital currencies played a role in terrorist financing’, and that the majority of virtual currency transactions were for very low amounts.

The Treasury Department report concludes that ‘The evidence available indicates that digital currencies have been used by illicit actors, but the information does not suggest that digital currencies have, at present, been widely adopted as a payment vehicle in the wider criminal community.’


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