Introduction
With the development of technology, our lives are evolving. One of the examples of this evolution is the money we use. Nowadays, using cryptocurrencies are very popular around the world due to the fact that they ensure decentralized, transparent, safe and untraceable transactions. The reason behind the fact that they are decentralized is that the cryptocurrency exchanges are built with the blockchain technology. Blockchain technology basically allows the direct transmission of the wanted information between the users regarding the fact that these transmissions usually have private keys. Bearing these specialties of both blockchain technology and cryptocurrencies, it can be said that using crypto money in illegal monetary transactions is understandable since they are hard to trace. If it is hard to track the usage of these transactions, can we prevent the illegal usage of the cryptocurrencies? Cryptocurrencies are based on blockchain technology so preventing the illegal usage of them is improbable. However, if the cryptocurrencies are legalized under a new blockchain technology which is approved by the governments, the illegal usage of the cryptocurrencies can be reduced. It will be beneficial to draw a line to the blockchain system that will be produced in order for both the users and the governments to approve and trust the system. This will be a new era for humanity in terms of reducing technology crimes and a step to prevent them in the future.
What is Blockchain?
In order to understand the mentioned definitions, we should firstly define the term “blockchain technology”. Blockchain technology provides a peer-to-peer network (P2P) which permits direct transmission of the information between all connected users which are generally in charge of a blockchain. These transactions are made using both public and private keys which enables users to avoid the transaction fees charged by traditional monetary institutions. (Aurin, 2020) Thus, it creates an area to act freely while transmitting crypto money. This freedom is called confidentiality of the transaction because it safeguards the users’ privacy which unfortunately enables the illegal usage of the monetary transactions regarding its untraceability.
What is Cryptocurrency?
Continuing with the definitions, the second term is the “cryptocurrency”. A cryptocurrency is a digital or virtual tool of exchange which is protected by blockchain technology. Moreover, “cryptocurrencies are highly autonomous and independent from both political influence and action by financial authorities.” (Aurin, 2020) This means, it is hard to legalize the activities done with the cryptocurrencies such as illicit monetary transactions. Despite this fact, if we are able to convince the governments to approve and legalize cryptocurrencies, then we can also open a gate to track them. By using the term “legalizing”, we mean, the governments who are willing to build a new blockchain technology, will provide the users safety and guarantee them to hold their money safely. In exchange, willing users will share their wallets which are used to transact money in the new blockchain technology which enables governments to track their actions. It can be said that this will be a win-win scenario in order to reduce the crypto crimes and ensure the safety of the users in the newly created blockchain platform.
Taking an Action Towards Crypto Based Illegal Activities
Taking an action towards crypto based illegal activities is crucial since they are rapidly spreading and increasing day by day. Criminals started to choose transferring money through cryptocurrencies since they can carry a lot of money without detection requiring no use of real names. (Blockchain Consultus, 2019) Crimes done by using cryptocurrency includes illegal trading, money laundering, avoiding capital controls and the potential to fund terrorism. (Blockchain Consultus, 2019) There is a statistical analysis that has been made regarding the increase of the illegal action through cryptocurrencies. “Cryptocurrency-based crime hit a new all-time high in 2021, with illicit addresses receiving $14 billion over the course of the year, up from $7.8 billion in 2020.” (Team, 2022) This analysis shows that, people who do not want to be traceable while doing monetary transactions, often use blockchain technology and so the cryptocurrencies. If those illegal actions are wanted to be reduced, like the other criminal actions, they should be traceable. In order to trace the actions, first of all, the cryptocurrencies should be acknowledged and legalized by the states. One of the ideas to combat the crypto-crimes is regulating new laws regarding the developing technology (Simi Siwisa, 2021). However, it is really hard to implement new regulated sanctions while the transactions are in a blockchain. So, the idea can be improved as regulating a new blockchain technology which will be approved by the wanting states and wanted users that provide safety for both sides. If states approve this new technology then they will also acknowledge the cryptocurrencies which will lead them to regulate new sanctions and laws for this new technology. Interpol also addressed this issue, Director de Wild stated that “Protecting citizens and the global economy from the abuse of cryptocurrencies and other virtual assets is a task that requires concerted and sustained action by law enforcement working hand in hand with government authorities, regulators and the private sector, which is why this kind of global, multi-sector event is key to global security” (INTERPOL, 2021). Bearing all these in mind, it can be said that legalizing cryptocurrencies shall be done manually for each state and so the crime rates will be reduced for those who use the new blockchain technology for their country.
A New Legalized Blockchain Technology
After all has been said, it is important to mention the details about the system which will achieve the reducing process of illicit usage of the crypto-based monetary transactions. The system basically will be creating a new blockchain technology which will enable both governments and users to track and guard their transactions. The users will be giving their identified blockchain wallet which will enable governments to identify the user’s credentials and so the transactions will not be made anonymously. Hence, the government would have an idea about the user’s transactions and this will give them an opportunity to analyze and detect whether the action is legal for their law system or not. Furthermore, with the information they have, the government can also take the taxation of the income gained by the user which is one of the reasons why governments usually abstain from legalizing cryptocurrencies. If we look at the perspective of the states, with this blockchain technology, the transaction of the volunteer users will be traceable so when there is a huge amount of crypto money in or out to the wallet of the blockchain user, the state can warn the user or take an action towards this transaction. In addition, if the state traces the transaction, it can also take legal action towards the suspicious transactions which will decrease the illegal usage of the cryptocurrencies. With this system, users will trust the government and the government will avoid any action that will cause damage to the user’s crypto money. Since, all procedures will be voluntary; only the actions of the volunteer would be traceable. Even though this might seem a bit narrow, this can be counted as a step towards fighting crypto-based crimes. In my opinion, the volunteer users would be a lot since if it is hard to track the activities of anyone then it is also hard to ensure the safety of the money they have in the blockchain database.
Conclusion & Summary
In conclusion, one of the features of the changing world is the cryptocurrencies. Cryptocurrencies are the digital or virtual moneys which are preferred frequently to be used in monetary transactions with blockchain technology. The reason behind this preference is that the cryptocurrencies create decentralized, transparent, safe and untraceable transactions. Unfortunately, regarding the fact that they are untraceable, they are attracted by the criminals. Criminals use cryptocurrencies to make illegal trading, money laundering, avoiding capital controls and potential to fund terrorism. Thus, Crypto-based crime rates are rapidly increasing day by day. It is really hard to prevent these actions for good. However, in our opinion, there is a way to reduce them. The way is to build a new system with blockchain technology which will be approved by the volunteer governments and users. Governments approved the system can imply their own legal system to the system as it will be volunteer for both of the parties. This system will be covering a new blockchain technology and allow users to share their cryptocurrency wallets and it will allow governments to track the transmissions done with those wallets. By doing this, governments will be ensuring the safety of the wallets of the users which is important and the transactions done by the users would be traceable. Being untraceable is one of the main reasons people have the courage to do illegal actions with cryptocurrencies, so by eliminating this, crimes will be reduced. In this scenario, people who registered to this new blockchain system will acknowledge the fact that if their transactions are considered as suspicious they will be questioned by the government and the law the state has. If this system works, it can’t prevent the crypto-based illegal actions but it can reduce those regarding the fact that a lot of people may want governments to safeguard their crypto money and volunteer to register the system. Thus, when they register, their actions will be observed so the criminals will be more timid because they no longer are anonymous.
Öykü TORUN
References
Aurin, A. (2020). Topic 1: The Regulation of Cryptocurrencies. Retrieved March 15, 2022, from SEKMUN ECOSOC: https://sekmun.org/wp-content/uploads/2020/02/ECOSOC-TOPIC-1.pdf
Blockchain Consultus. (2019, October 4). Cryptocurrency and crime: uses and ways to stop it. Retrieved March 20, 2022, from Blockchain Consultus: https://www.blockchainconsultus.io/cryptocurrency-crime-uses-ways-stop/
INTERPOL. (2021, December 9). Cryptocurrency crime: preventing the misuse of virtual assets by organized crime for money laundering. Retrieved March 16, 2022, from INTERPOL: https://www.interpol.int/News-and-Events/News/2021/Cryptocurrency-crime-preventing-the-misuse-of-virtual-assets-by-organized-crime-for-money-laundering
Malik, N. (2018, August 31). How Criminals And Terrorists Use Cryptocurrency: And How To Stop It. Retrieved March 28, 2022, from Forbes: https://www.forbes.com/sites/nikitamalik/2018/08/31/how-criminals-and-terrorists-use-cryptocurrency-and-how-to-stop-it/?sh=67b3acc33990
Mulligan, C. (2018, December). Blockchain and Sustainable Growth. Retrieved March 21, 2022, from UN Chronicle: https://www.un.org/en/un-chronicle/blockchain-and-sustainable-growth
Simi Siwisa, S. K. (2021, July 28). Why we need new rules and tools for cryptocurrencies. Retrieved March 25, 2022, from World Economic Forum: https://www.weforum.org/agenda/2021/07/new-rules-tools-cryptocurrencies/
Team, C. (2022). Crypto Crime Trends for 2022: Illicit Transaction Activity Reaches All-Time High in Value, All-Time Low in Share of All Cryptocurrency Activity. Chainalysis.