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Bitcoin Database to Tackle Fraud

As part of a large-scale crackdown on cryptocurrencies, the European Union is considering a database of Bitcoin owners in Europe under laws designed to fight money laundering and terrorism. The database will be a central hub of information on the individuals who use the online exchanges where Bitcoin is marketed. The proposal follows fears that the anonymity enjoyed by Bitcoin investors is being used to finance criminality and evade taxation. With the total value of all cryptocurrencies in circulation now over $600bn, there is a strong argument for regulation and tighter control.

The decisions were part of a number of amendments to the Fourth Anti Money Laundering Directive. Online exchanges, it was decided, must abide by strict customer identity requirements, and suspicious activity must be reported to the authorities. The amendments included a clause stating that the EU may set up a central database registering users' identities and wallet addresses". The database would be accessible to financial crime fighters such as the National Crime Agency, as well as asset recovery officers.

Bitcoin has often been considered anonymous since users do not have to sign up with their real names. This has made it a favourite of the online black market and is often linked to dark web drug purchases and terrorist financing.

However, the new requirements would make it less possible to hide transactions and may raise privacy fears. Bitcoin’s users are not public, but transactions are, so being able to link transactions to individuals may prove controversial.

The new EU rules are the latest intervention from regulators as money pours into Bitcoin. Its value has reached almost £15,000.

Regulators are also carefully watching initial coin offerings, a crowdfunding mechanism that uses cryptocurrencies, for signs of fraud and cyberattacks, while America's IRS is cracking down on tax avoidances.

What does this mean for Bitcoin Investors?

Whether the regulation of bitcoin will encourage more investors as relatively safe, mainstream currency remains to be seen. As Bitcoin is used on the black market, the lack of privacy may see certain investors re-think their strategy and pull out, causing the bubble to burst for everyone, as people withdraw their funds at the signs of any future wobbles in the market.

Many venture capital firms now directly invest in new cryptocurrencies, and, as can be seen by the offshore banking system, there is a demand for individuals and companies to store money in an investment where it is immune to taxation. For these reasons, there is the argument that the demand for Bitcoin will remain buoyant despite heavy regulation.

ICO Venture Fraud

Another major new hurdle for enforcement agencies today is the wave of ICO venture frauds we see across the globe. Initial Coin Offering (ICO) ventures have been given a hard time recently, as not only is fraud a common occurrence, in the form of companies being set-up for criminal reasons where there is no intention of creating a viable purpose, but also the ventures are often being used by criminals looking to launder money. Currently, a person setting up an ICO venture does not have to reveal their identity. Regulation in this area will certainly address some of these problems, but to what extent regulation will change things remains to be seen. 

The UK is currently well behind other countries in terms of cryptocurrency regulation. In the US, we are seeing individuals face charges for cryptocurrency crimes on a regular basis. The US financial regulator, the Securities and Exchange Commission (SEC) has warned the public over cryptocurrency and initial coin offering investments, where there is substantially less investor protection and greater opportunities for fraud. A new cyber unit has been created within the SEC last September which recently shut down an initial coin offering scam worth over $15 million. This is the first case filed by the cyber unit.

Whether you are an individual bitcoin investor, are launching an ICO venture or considering investing in one, our solicitors can guide you on the right track. We represent individuals under investigation for fraud and are also on hand to offer guidance on compliance and regulation issues for you and your business. Our solicitors are experts in financial crime and fraud cases and have the requisite experience to see you through an investigation – giving you practical and pragmatic advice every step of the way.

Why Lewis Nedas?

We are a boutique law firm with over thirty years’ experience of defending corporate and financial crime and white-collar fraud. We know the mindset of the various prosecution and regulatory agencies and have an excellent record of success when dealing with those bodies.

We bring a fresh approach to legal services in this area because of our solid fraud defence and regulatory background and our no-nonsense approach to delivering practical solutions for our clients. The firm has been a member of the specialist VHCC fraud panel since its inception; this is run by the Government, which ensures the highest levels of practice and expertise by those of our staff upon the panel.

Contact our Financial Crime Solicitors London Today

At Lewis Nedas Law, you can rely on us to deliver a high-quality legal service effectively and efficiently. We have the experience and know-how, without the City of London overheads or steep hourly rates, and work closely with exceptional Counsel as appropriate to ensure you the best outcome possible.

We are aware that legal costs can be a burden, and we are keen to keep our charges to as low a level as can reasonably be achieved, and will always be open about costs. We will guide you as to the most effective ways of enabling us to give you the best service we can, whilst also keeping our fees down. 

This article is intended to be no more than a general guide and does not comprise legal advice. You are strongly advised to take legal advice before making or resisting any application to the Court.

For legal advice and assistance, please contact us today on 02073872032 or complete our online application form.

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