Friday 29 Mar 2024
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This article first appeared in The Edge Financial Daily on October 6, 2017

KUALA LUMPUR: As the use of cryptocurrency gains traction, so too has the debate over the benefits and drawbacks of the digital currency that uses cryptography for security. This same topic was one of the issues that took centre stage yesterday at the 9th International Conference on Financial Crime and Terrorism Financing 2017.

Two panellists at a session titled “Cryptocurrencies: Friend or Foe?” provided differing viewpoints to a packed conference room, with a promoter advocating the use while a detractor argued it allows illegal activities to flourish.

Mark Smalley, co-founder and chief executive officer of Neuroware.io Malaysia which helps organisations adopt technologies like blockchains, disagreed that cryptocurrencies, in particular bitcoin, are completely anonymous.

“Bitcoin is not as private as people think. So bitcoin to me, with the transparent nature of its transactions, is a friend,” the panellist said.

He also disagreed that the use of bitcoin only benefits criminals in their activities, and that the digital currency provided no added value for legitimate use.

“I would say that is absolutely ridiculous. I would say you would have to be the most stupid criminal on the planet if you were to use bitcoin — a currency that has every single transaction traced and tracked, and which is in possession by everybody else [for unlawful activities].

“The majority of criminal activities are [done] with cash, and will continue to be so until cash is no longer a thing,” he said.

On bitcoin’s value, Smalley shared he hailed from a family of finance professionals, but he had only made one financial investment in his life.

“My parents, brothers and so forth are independent financial advisers, [and] equity fund managers, and despite having a family in finance I only made one investment in my life. It was five years ago and I have had 42,000% returns — that investment is bitcoin,” he quipped.

But the US Department of Justice’s regional legal adviser for cybercrime in Asia, Thomas S Dougherty, categorises cryptocurrencies as a foe, citing the anonymity it provides users, and its lack of regulation.

“From a US law enforcement perspective, the dark web exists primarily because of cryptocurrencies. For example, the Silk Road website (an online black market for drugs, guns and fake documents) that was taken down in 2013. More recently, the FBI was involved in taking down AlphaBay (another online criminal marketplace).

“We see [cryptocurrencies like] bitcoin and ethereum as sort of the grease to the gears that allows this sort of illegal activities to occur on the dark web,” he said.

Recently, it was reported that one of Britain’s worst paedophiles, Richard Huckle, who abused hundreds of children during his stay in Malaysia, had attempted to post his sexual activities with a child on the dark web in return for bitcoins.

Ali Shukri Amin, a 17-year old American teenager, was sentenced to 11 years in a US prison in 2015 for using his Twitter account to provide instructions to militant group Islamic State (IS) on how to use bitcoin to mask the provision of funds to IS.

Dougherty said he “respectfully disagrees” with Smalley’s opinon that bitcoin usage does not aid criminal activities.

“The reason why criminals are using bitcoin is because it is more difficult for them to be found, or traced for using it. There are a couple of extra steps that law enforcement would have to take to be able to figure out who they are and to identify them, as opposed to if they were doing wire transfers.

“That’s what we are seeing: that the majority of the Internet crimes that we’re trying to pursue are at some level being transacted through cryptocurrencies,” he said.

China moved to clamp down on cryptocurrency trading as well as initial coin offerings last month, while South Korea followed suit last week when it announced a ban on raising money through all forms of virtual currencies.

On Wednesday, Bank Negara Malaysia governor Tan Sri Muhammad Ibrahim said the central bank, which is set to issue guidelines for cryptocurrencies by year end, will reveal its stance on the issue then.

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