As the EU prepares to discuss cryptocurrency regulation, an analyst at Europol says that anonymous altcoins are becoming a major problem in the continent, according to Bitcoinist.
Jarek Jacubchek said to Business Insider: “We can see a quite obvious and distinct shift from bitcoin to cryptocurrencies that can provide a higher level of privacy.”
Bitcoin is the most famous cryptocurrency, and one of the reasons that it took off was that people understood it to be anonymous. However that simply isn’t true – it is pseudonymous. Meaning, that once the link between virtual and physical identity is made, you are rumbled. Ross Ulbricht was caught by his transactions being traced, for example.
Mirroring the South Korean government, the EU actually outlawed anonymous transactions at the end of last year, telling cryptocurrency exchanges and wallet providers EU-wide that they will have to register their customers’ identities within 18 months.
Deloitte’s Banking Report Forecasts the Future of Social DistancingGo to article >>
For this reason, criminals have been turning to altcoins that are truly anonymous, according to Jacubchek. Examples incude Monero, which encrypts transacts and generates fake addresses; Zcash, which generates ‘zero-knowledge proofs’ to ensure transaction validity without revealing the sender, recipient, or transaction amount; and Dash, which offers a service called ‘PrivateSend’ which allows users to send money…privately.
According to Bloomberg, all Monero transactions are flagged as high-risk by software that tracks suspicious transactions, compared with about 10 percent of Bitcoin transactions. Monero’s core developer Riccardo Spagni said: “As a community, we certainly don’t advocate for Monero’s use by criminals. At the same time, if you have a decentralized currency, it’s not like you can prevent someone from using it. I imagine that Monero provides massive advantages for criminals over bitcoin, so they would use Monero.”
On the other hand, the use of altcoins to illicit ends could be being exaggerated by the authorities. Bitcoin is the preferred cryptocurrency on the dark web, according to Bitcoinist, because it is relatively easy to use. Jacubchek explained that the use of altcoins is a mark of sophistication in a criminal organisation, because the amount of technical know-how required to use them is likely to dissuade the opportunistic or casual criminal.
But then, a recent global analysis of cryptocurrency activity carried out by UK firm Elliptic showed that less than 1 percent of Bitcoin transactions are of criminal origin. So perhaps there is not so much cause for worry..