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European Commission Targets 'Bitcoin Anonymity' For Regulation

The European Commission published an“action plan” (pdf) for stricter regulations against methods that help terrorists get financed. The paper showed prepaid cards and Bitcoin as two payment methods that would be impacted by these regulations if they are approved by the European Parliament by June.

In Bitcoin’s case, the rules will force the verification of users whenever they want to convert their Bitcoins into real currencies.

EU Commission Vice President Valdis Dombrovskis said:

“We must cut off terrorists’ access to funds and enable authorities to better track financial flows to prevent devastating attacks such as those in Paris.”

However, in a post published by the European Union’s own website two weeks ago, experts were warning MEPs that they shouldn’t overstate the risk of Bitcoin, especially when cash is even more anonymous than Bitcoin:

"In fact cash is likely to be a much more anonymous means of transferring value," said Sean Ennis, a senior economist from the OECD. "The ownership string for virtual currency is public and that allows a tremendous amount of analysis of transactions."

This is backed by the EU’s own law enforcement bodies such as Europol, who so far haven’t found any reason to be worried about terrorists being funded through Bitcoin:

"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."

Bitcoin isn’t anonymous by default, but it is pseudonymous. All transactions from a Bitcoin address are permanently logged into the Bitcoin blockchain, and anyone can see which addresses exchanged money.

To actually identify the person behind the address, law enforcement would also need to tie that Bitcoin address to a real person, in the same way that all web tracking happens. Intelligence agencies and law enforcement have become adept at tracking people online, so tracking down a Bitcoin user is no different.

The only time Bitcoin is truly anonymous is when people use Tor to create the addresses and then transact from them, also over Tor. The moment someone’s identity is tied to a certain “anonymous address,” they become exposed.

The European Union’s solution is not to ban Tor (at least not yet), but to force Bitcoin users to reveal their identity the moment they try to exchange Bitcoin for real currencies. Most, if not all, of the major digital currency exchanges in the EU are already heavily regulated and demand photo IDs and proof of address before they enable your account, so it’s not clear at whom this regulation is targeted.

Bitcoin and other digital currencies or blockchain-based platforms are only just beginning to gain traction with big companies, so there is also a worry that heavy regulations could stifle these technologies before they get a chance to get off the ground.

Lucian Armasu is a Contributing Writer for Tom's Hardware. You can follow him at @lucian_armasu. 

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  • firefoxx04
    Good luck with that
    Reply
  • totedati
    Well online tracking and surveillance is not hard if you really want to do that! But is time to remember the hard and unpleasant fact that in all terrorist attacks the perpetrators was already under intelligence surveillance, on short list of suspects to watch, so with bitcoin or cash payments or not that do not make any difference about the final result and dead body count. The real issue is the rule of law who state that if you intent but do not act you are not guilty of anything and the old logical problem of proving that a liar lies or tells the truth which is an unsolvable problem if you stick to the scientific method.
    Reply
  • Robert Cook
    The whole point of bitcoin is that there is no government regulation. If something is popular because it is unregulated, regulating it will simply prompt bytecoin to become a thing. I wonder how much of these inept law attempts are grounded on the fact that most of these politicians do not really understand the way the internet works? They seem to love proposing blanket bans that are either completely ineffective, utterly ridiculous, or next to impossible to carry out. The sad part is, it seems they simply do not know any better.
    Reply
  • totedati
    Sincerely i really doubt that they are inept and incompetents about how internet work. Even bitcoin technology. And i really worry that they have an hidden agenda, that they try hard to put back the genie in the lamp, and that they will not stop until will succeed.

    I live in a young democracy ant in the past i was really naive about issues like this but now i think what we need to worry is the hard fact that the good intentions, unintentional wrongdoings and sincere care about "we, the people" is a rara avis in all real politics, in all countries and the proved fact that good intentions is not the same thing as intelligence and a rich, genuine and proved professional career. Very bad persons who can do very bad things can be intelligent, competent, rich and with a brilliant professional career.

    Reply
  • Robert Cook
    17439947 said:
    Sincerely i really doubt that they are inept and incompetents about how internet work. Even bitcoin technology. And i really worry that they have an hidden agenda, that they try hard to put back the genie in the lamp, and that they will not stop until will succeed.

    I live in a young democracy ant in the past i was really naive about issues like this but now i think what we need to worry is the hard fact that the good intentions, unintentional wrongdoings and sincere care about "we, the people" is a rara avis in all real politics, in all countries and the proved fact that good intentions is not the same thing as intelligence and a rich, genuine and proved professional career. Very bad persons who can do very bad things can be intelligent, competent, rich and with a brilliant professional career.

    A valid point, they can be very wise and they can be working for their own means or someones else's, but with the stuff they propose, like banning encryption, you have to scratch you head an wonder where they got the idea that such an idea would work.
    Reply
  • milkton
    What a jike, do they realy dont know how terrorists get financed?
    Reply
  • jasonkaler
    I bet all terrorist organizations will immediately follow this proposed law, rather than just selling their bitcoins on the black market.
    Reply
  • JonDol
    The whole point of bitcoin is that there is no government regulation. If something is popular because it is unregulated, regulating it will simply prompt bytecoin to become a thing. I wonder how much of these inept law attempts are grounded on the fact that most of these politicians do not really understand the way the internet works? They seem to love proposing blanket bans that are either completely ineffective, utterly ridiculous, or next to impossible to carry out. The sad part is, it seems they simply do not know any better.

    Actually not being regulated is the only problem here and they are grasping on the anti-terrorism stuff to justify its surveillance. With the Swiss banks' secrecy dissapearing more and more ppls started to think to the virtual money as a mean to avoid taxes
    Reply
  • dextermat
    too little too late
    Reply
  • g00ey
    The thing is that those Islamic terrorists were funded by a small clique who owns and controls the banking system. That same clique also owns the security so when a large transaction is done to these cells they can make the security turn a blind eye on those transactions. Arguments as to why these transactions should be let through could be that they are for national security reasons or for supporting diversity or whatever thinkable reasons that could be given for ignoring such transactions. That's how ISIS in the middle-east has been funded, these are not claims from my side but there are UN documents, official statements from various sources among other things to back this up.

    The term "terrorist" is actually a very vague term. It is very convenient to call someone with the "wrong" opinions "terrorist" and use violent force against this so called "terrorist". This happens a lot in the Ukraine and the Poroshenko regime, they arbitrarily call someone's grandma a "Russian terrorist" and then drops a bomb in her living quarters. There are hours of footage available to back this up.

    The purpose of these anonymous services is not to stop terrorism but to prevent spontaneous political oppositions among the people to get a foothold on affected countries, particularly in Europe. The thing is that as soon as you as an individual or as a group start working against the government, you will automatically be labeled a "terrorist" even during circumstances where the government has gone rogue and is working against its people or even trying to eradicate them, either through violence or through enforced mass immigration of strangers.

    It may sound alien to someone who has grown up in the safety of a western welfare society that such a thing could happen in the Western world, or the Occident if you will. But it doesn't take much reading about the Bolshevik controlled communist Russia and its Gulags or the Ukraine and the Holodomor to realize that a similar thing is very possible to happen in the western world as well. Or even today as one should not forget that the Holodomor and the Communist Russia didn't happen that long ago.

    Reply