Counterparties: Bits of laundry
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Even criminals need financial intermediaries. Yesterday federal prosecutors shut down Liberty Reserve, a currency exchange and payment processor, and indicted seven people connected to the company. The indictment called the company a âfinancial hub of the cybercrime world… including credit card fraud, identity theft, investment fraud, computer hacking, child pornography, and narcotics traffickingâ, and alleges it laundered $6 billion via 55 million illegal transactions for one million users over the last seven years.
The Tico Times has a detailed article on the history of the Costa Rica-based business, not to mention âflashy cars, lavish gifts, multiple identities and armed Russian henchmenâ.
The criminal attraction to Liberty Reserve is obvious. An email address was all that was needed to to set up an account — some accounts had oh-so subtle names like âRussian Hackersâ — and paper trailsÂ were nonexistent. The principals seemed aware of who used their services: in an IM conversation, they referred to the company as a âmoney laundering operation that hackers useâ.
Speaking of things hackers like that can be used to launder money, what does Liberty Reserveâs indictment mean for Bitcoin? Kevin Roose says that while both Liberty Reserve and Bitcoin offer users anonymity, âin Bitcoin’s case, there’s nobody to arrest, no entity to prosecute for the sins of the system â. Bitcoin is vulnerable, Roose notes, to enforcement that targets the exchanges and processors which the currency relies on to function. Timothy Lee thinks that any attempt to shut down, or even regulate, Bitcoin would only drive the currency further underground (assuming thatâs possible), making it all the more attractive to criminals.
Kirsten SalyerÂ says âmore government scrutiny could actually turn out to be a good thingâ for Bitcoin. A competitor is gone, and more money laundering enforcement could help accelerate Bitcoinâs adoption by mainstream users.
Bitcoinâs value has remarkably stable since news of Liberty Reserveâs indictment broke. Perhaps thatâs another bit of anecdotal evidence that for die-hard users, there is no such thing as bad news for Bitcoin. To the Bitcoin faithful, everything is a stop on the path to legitimacy. — Ben Walsh
On todayâs links:
And, of course, there are many more links at Counterparties.