Bitcoin: Is This The Next Trend In Crypto Fraud?

Bitcoin: Is This The Next Trend In Crypto Fraud?

Internationally fraud caused through money, be that cash or digital seems to be on the decline. As banks and governments become more tech savvy, the room for fraudulent financial activities decreases. It’s actually quite hard to commit financial crimes with FIAT currency, for good reason too. The intervention of banks and financial service providers means that criminals tend to get caught – this is a good thing of course. Cryptocurrency on the other hand brings some question to this, through cryptocurrency fraud such as money laundering can be a little easier to carry out, thanks to the anonymity and decentralisation of the blockchain.

Thankfully though, cryptocurrency is hard to translate back into the real world, so often laundered money through crypto struggles to re-enter traditional financial systems. The international worry regarding cryptocurrency is when the bridge between FIAT and crypto is truly established. Yes, this will allow for the adoption of Bitcoin and other cryptocurrencies, but it will also allow for a new kind of fraud and a new kind of money laundering. A recent article by Financial Times explores this idea further, suggesting that the production of Visa based cryptocurrency cards could be the catalyst for this new, potential explosion in crime.

According to Financial Times:

“In the battle against international money laundering, cryptocurrency remains the weakest link. Users can receive payments from unknown sources from around the world, which makes it hard for the network to keep out the proceeds of crime — ransom cyber-attacks, drug trafficking, or worse. An extensive network of dealers also buy or sell crypto against cash.”

As we have stated, as it stands it’s usually quite hard to translate stolen and falsified cryptocurrencies back into the real world – it’s possible, but it’s a difficult task that often costs a lot of money (through blockchain transaction fees like gas for example). So, you might ask what the worry here is? As Financial Times rightly points out, we are on the cusp of seeing a huge move from Visa that could open the gates and build that bridge between the crypto world and the FIAT world:

“Criminally obtained cryptocurrency is still mostly contained in terms of real-world spending. Any big cash-out spree by the dark economy also bears the risk of crashing the entire crypto market, which puts many people off from taking money out. This is changing. One of the biggest gateways into the core financial system, the Visa network, is opening itself up to crypto-funded debit cards. Others have tried to launch such crypto cards before but failed for compliance reasons.”

Crypto funded debit cards will in turn allow hackers and bad actors to more easily turn their stolen or laundered cryptocurrency into FIAT currency to spend in the real world. Moreover, this money will in theory be cleaned up and rendered untraceable as it’s made its way through the blockchain. The Visa card is currently in production in partnership with Coinbase, one of the world's leading cryptocurrency exchanges. The idea is simple, anyone with a Coinbase account will be able to use the Visa card anywhere they would use a normal Visa card, the account will then spend cryptocurrency and convert it into FIAT currency at the point of sale. This means, potentially illegitimate or laundered cryptocurrency is changing hands via an easy to use Visa payment system – something that hasn’t been available before, and something that many rightly believe could leave the industry exposed to bigger and more sophisticated money laundering scams.

Furthermore, according to Financial Times:

“In theory, that means anyone with a Coinbase account has the potential means to receive payments from an illegitimate source with little to no barrier. Visa says that it subjected this partnership to enhanced scrutiny and noted that Coinbase is regulated by US authorities. Although Coinbase often blocks accounts because of suspicious activity, I find it hard to believe that their system can eliminate risks entirely.”

What do we think about this? The points made by Financial Times are valid, though we think they are being a little pessimistic about this. We have to put more trust in companies like Coinbase and of course Visa who are no doubt aware of the risks associated with a payment card of this nature. Policies and systems will be put in place to ensure that the risk of crime is reduced and is minimised.

Yes, people can and probably will launder money through cryptocurrencies and crypto payment cards, but surely the focus here should be on the law and the law makers who are letting these criminals slip through the nets?

Cryptocurrency payment cards such as the one in development by Visa are going to do very good things for cryptocurrency adoption, making the likes of Bitcoin more accessible to the general public and more like a normal part of our daily lives. Yes, there’s some risk here but all money includes risk, be that FIAT, crypto, gold or even something else. If its got a store of value, people will use it for good and for bad – as a community we just need to work together to ensure that the good always outweighs the bad!

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