Regulation of Cryptocurrencies to deter crime in Australia

The recent rally of cryptocurrencies such as Bitcoin, Ethereum or Dogecoin has attracted a lot of public interest in cryptocurrencies and many people are looking to invest in them. While governments and financial institutions worldwide become increasingly aware of the multiple uses and benefits cryptocurrencies have to offer, there is no denying this type of currencies can be used for illegal activities, hence the need to regulate this domain. Let’s have a look at the existing cryptocurrencies’ regulations in Australia.

What makes cryptocurrencies attractive to criminals?

Most of the people trading in cryptocurrencies are small (or large) investors looking to make a quick profit, although some understand the practical utility of cryptos and the vast array of digital applications they could be used for and consider themselves long term investors. Such activities are perfectly legal, but the relative anonymity of cryptocurrency transactions makes this method of payment very attractive to criminals. 

You can use cryptocurrencies to pay for anything, including drugs, arms and child pornography. aim to deter illegal uses of the currency. All the transactions are registered on the blockchain, but the only information available to law enforcement agencies are the digital wallets involved in a transaction. It is very hard to trace a crypto wallet to a person, so there’s really no telling if a certain transaction is legitimate or not. 

How can you trace cryptocurrency transfers?

If one individual sends a large sum of Bitcoin across the world it is impossible for law enforcement agencies to know who got the money and in exchange for what. However, the use of cryptocurrencies is quite limited for now and there are few ways to actually spend Bitcoin in the real world.

This means that, at some point, an individual will want to exchange cryptos for fiat, the state-backed currencies people normally use. This can be done through cryptocurrency exchanges and this is what Australian authorities are currently targeting.

As of 2018, Australian crypto exchanges are required to verify the identity of their users. Not only that, all cryptocurrency exchanges are required to inform of any suspicious activities and notify authorities, especially when it comes to sums in excess of $10,000.

If state authorities have reason to believe a certain transaction was related to criminal activities, the users who took the money out can easily be traced. Before any action is taken, authorities can look at that person’s criminal record and see if they were previously involved in criminal activities.

The future of cryptocurrency regulations

There is no doubt among financial experts that cryptos and blockchain technology are the way of the future. For the time being, the regulations in place do very little to combat money laundering and criminal activities via cryptocurrencies. Much remains to be done. 
One can only expect that tougher regulations will be introduced in the following years. For instance, since people occupying management positions in the traditional banking system in Australia often need to undergo Australian , it is to be expected that one day those working in crypto exchanges will have to do the same.

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