By David Drake
The financial regulator in Japan, Financial Services Agency (FSA), has been quietly advising cryptocurrency exchanges in the country to quit trading Zcash, Dash and Monero. The three cryptocurrencies are seen to be favoured by money launderers as well as others who engage in criminal activities.
The decision to discourage cryptocurrency exchanges from trading in these altcoins is largely informed by a report released by Europol last year. In the report, Europol indicated that these altcons are among the prefered digital coins of underworld participants because they are not easy to trace compared to currencies such as bitcoin.
In the past, Monero has been targeted in cryptojacking attempts with hackers causing malware infections on computers in order to hijack their CPUs and then use them for mining the digital currency.
But will ceasing their trading address the problem of cyber crime that has become a major challenge which the cryptocurrency industry has to contend with on a daily basis? According to Vadim Kurochkin, CEO of Soundeon, it certainly won’t solve the problem. Instead, it will only hurt the public.
He says, “Japan’s Financial Services Agency’s approach to curbing crime by compelling exchanges to give up Monero, Zcash, and Dash constitutes an archaic approach within the crypto environment. The FSA will soon learn just how ineffective this solution is when bad actors will be the first to find alternative means of maintaining anonymity. The mass public, however, will once again be the most adversely affected by FSA’s actions.”
On his part, Antonio Sainz, CEO and Co-Founder of INCLUSIVITY, feels the steps taken by government authorities seem to criminalize all users because of actions done by a few people who have criminal intentions.
Firstly, we want to state that we are against any type of crime, whether it is cyber or physical, especially due to the philosophy of INCLUSIVITY, which attempts to use blockchain to generate wealth and incorporate billions which were excluded from the formal economy. Secondly, we agree that we must all respect the international standards of KYC, AML and CFT. That being said, the authorities, for the illegal use that certain criminals utilize cryptocurrencies for, should not criminalize all honest citizens who use this disruptive technology that, in the end, if used correctly can help to make a better and a fairer world.
The architecture of cryptocurrencies makes it difficult to put a stop to a digital currency that is already in use.
Tali Rezun, co-founder and CEO of 4th Pillar Ltd says, “Cryptocurrencies can not be stopped, it’s imperative for regulators and tax authorities to understand cryptocurrency market so they can tax it correctly. I’m sure that with reasonable taxation the money laundering in cryptocurrency market will diminish. If exchanges will stop handling private blockchain tokens mentioned, new similar will emerge.”
With reports of cryptocurrency losses due to hacking incidents becoming rampant, there is a need for stakeholders within the cryptocurrency industry to identify ways to address cyber crime.
According to Sean Salloux, COO of Baanx Group Ltd, crypto exchanges should improve their security to reduce risks associated to cyber crime.
He says, “I suggest crypto exchanges, use best in class security hardware, software, and policies to minimise the risks. This is the tack that Baanx has taken with everything from mobile app shielding to best in class security policies like background checks on all employees. Crypto companies need to think about end-to-end security, form all aspects and learn from other segments.”
Disclaimer: David Drake is on the advisory board for most of the firms mentioned or quoted in this article.