Cryptocurrency has had a big week. At the BRICs (Brazil, Russia, India and China) conference in China, Russian President Vladimir Putin praised the system’s value. The nations discussed forming a BRICs-wide cryptocurrency as an “alternative to other financial instruments.”
Additionally, the National Bank of Ukraine took its first step towards working out how to regulate virtual currencies as the value of Bitcoins rose and fell dramatically.
Besides being a high-tech way of making safe and anonymous transactions, the real value of cryptocurrency lies in giving those excluded from the world financial system for criminal activity access to a world of shadow banking.
Take Eastern European oligarchs and government officials, skilled at amassing fortunes at the expense of their citizens. Their problem is how to store ill-gotten gains. Cryptocurrencies present a solution. Asset movement cannot be traced and decentralized technology means that no single regulator can be effective. Cryptocurrencies are “sanction-proof.” Russia is, in fact, developing its own cryptocurrency. Some have taken notice. Australia’s Criminal Intelligence Commission alleged last week that cryptocurrencies assist “serious and organized crime.” Not enough consideration has been given to whether pumping money into cryptocurrency is akin to creating a banking system for the world’s black market.
On the upside, blockchain technology could provide a mechanism of automatic accountability and ease for any transaction.
But given the people who have lately started to push the innovation and the money involved, it’s worth asking whether this is merely a system that uses cash and gullibility to allow the world’s criminal syndicates and tax cheats to store their shady wealth out of public oversight.