Bitcoin and other cryptocurrencies are continuing to attract attention from authorities for all the wrong reasons. For instance, a new U.S. Justice Department report is taking aim at the “emerging threats and enforcement challenges” associated with digital currencies, establishing a “Cryptocurrency Enforcement Framework” to address problems.
In unveiling the report, U.S. Attorney General William Barr said that while cryptocurrency could fundamentally transform how human beings interact and how we organize society, “ensuring that use of this technology is safe and does not imperil our public safety or our national security is vitally important to America and its allies.”
FBI Director Christopher Wray added that his agents have observed the dangers of cryptocurrency’s criminal usage firsthand, noting that a promising technology has sometimes been used to conduct illicit activities.
“We see criminals using cryptocurrency to try to prevent us from ‘following the money’ across a wide range of investigations, as well as to trade in illicit goods like criminal tools on the dark web,” Wray said.
The FBI chief cited the current use of cryptocurrency to demand ransom payments from businesses and individuals that have been the victims of ransomware and malware attacks as one of the ways that criminals are evolving their usage of an anonymous means of money.
New Enforcement Framework
In order to address these problems, the 71-page report by the DOJ’s Cyber-Digital Task Force called for further education and outreach, as well as close cooperation between the public and private sectors. That includes direct engagement with banks, financial institutions (FIs) and the community of actual cryptocurrency users.
“To promote public safety and protect national security, all stakeholders – from private industry to regulators, elected officials and individual cryptocurrency users – will need to take steps to ensure cryptocurrency is not used as a platform for illegality,” the study authors wrote.
A Slew of Problems
Even before the new government moves, bitcoin and other cryptocurrencies were fighting an uphill battle against a stream of reports concerning a range of criminal activities, as well as slow uptake and usage by mainstream consumers.
Among the issues plaguing bitcoin and its peers is the fact that unlike credit card transactions, cryptocurrency payments are almost immediately irreversible. That’s a trait that makes them appealing to scammers who are eager to avoid credit card chargebacks.
“When it comes to crypto, consumers may have a chance of recovering funds only in the case of unauthorized transactions,” said MyChargeBack Vice President Michael Cohen.
Unfortunately, scams are common. In the past month alone, PYMNTS’ Bitcoin Daily has reported on nearly a dozen different schemes involving bitcoin or other cybercurrencies.
Just this week, reports emerged that at least 74 crypto exchanges around the world have folded so far in 2020, often due to criminal charges or security breaches. For instance, a Singapore exchange faced a $200 million security breach.
In addition, research has found that the public’s increased online activity and the massive digital shift has led to a COVID-era increase in illicit activity.
Lagging Consumer Use Cases
There’s also the problem that bitcoin still isn’t widely accepted as a means of consumer payment. Its usage as a day-to-day currency pales in comparison to its popularity as a speculative investment or a tool for criminals.
For example, Overstock CEO Jonathan Johnson recently told Karen Webster that bitcoin as a consumer currency still has speed issues in terms of timing transactions properly.
“I don’t think it is quite immediate enough for payments in some cases,” Johnson said. “It’s tough when I’m in a 7-Eleven and I have to wait for the bitcoin blockchain to confirm the sale. That is not going to work for most people.”
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