Cryptocurrencies like Bitcoin can be “easily tracked,” said Michal Gromek, Co-Chair of the Digital Asset Task Force, a committee at the Global Coalition to Fight Financial Crime.
Would-be criminals cannot easily escape law enforcement.
“Conducting transactions on the blockchain and feeling that you will run away and be unpunished is not true,” he said. “Most suspects can be easily tracked.”
Gromek said that coin exchanges are usually subject to KYC (Know-Your-Customer) and anti-money laundering regulations. This makes it easier to trace criminals.
“On a global level, there is a financial action task force… to ensure that cryptocurrency brokers are subject to [legislation],” he explained. “When you send money to another wallet, and then to a sanctioned entity, this is still visible on the blockchain… and that can still be reported.”
Gromek spoke with David Lin, Anchor and Producer at Kitco News, at the Future Blockchain Summit in Dubai.
Financial Crimes
It is “not very smart” to use “pseudo-anonymous” cryptocurrencies like Bitcoin or Ether to conduct illegal transactions, said Gromek.
“According to reports, illicit activities on the blockchain are roughly around 0.15 percent of all transactions,” he stated. “Conducting transactions on the blockchain with pseudo-anonymous currencies is not smart.”
Since the blockchain stores data on all transactions and wallet addresses, police can use these data to track down criminals.
“You just type in different cryptocurrency addresses and you can see how the transactions have been flowing,” he said.
Even cold wallets, which are offline, are not impervious to surveillance, since cold wallet crypto holders, who want to use their funds, will ultimately need a hot wallet, Gromek said.
Hackers and Scam Artists
In order to prevent money from being stolen from a crypto scammer, investors should “select partners which are active in a trusted jurisdiction, working with a good regulator,” said Gromek.
“Some regulators, ask you [crypto companies] to deploy your code to them, and then they review your code,” he said. “And then, there is a trust approval saying that this code or this token or this solution is approved.”
However, he emphasized that there is always a “risk” when investing in new products.
“You basically have to have a bit of faith that whatever we do on a global level will yield results that are accessible for everyone,” said Gromek, referring to the task of regulators.
Privacy Coins?
Monero, a proof-of-work cryptocurrency that uses complex codes to hide wallet addresses, is a so-called ‘privacy coin,’ which is intended to protect both anonymity and privacy of users. This is in contrast to Bitcoin, in which a wallet address can be used to identify users.
However, even so-called privacy coins like Monero can be traced by law enforcement.
“There are still tools that we can use for privacy coins as well, that are being used to identify suspects that are conducting certain crimes,” said Gromek.
To find out Gromek’s thoughts on Central Bank Digital Currencies, watch the video above.
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