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The Chief Scientist of Quebec, Rémi Quirion, has published a document rejecting the popular “myth” that illicit transactions are among those for which bitcoin is principally used. Quebec’s Chief Scientist is closely associated with the Fonds de recherche du Québec (FRQ) – a publicly funded institution dedicated to “providing support for the production and dissemination of knowledge.”
Quebec’s Chief Scientist Dismisses Claims That Bitcoin is Commonly Used for Illicit Purposes
Mr. Quirion asserts that “Bitcoin is often blamed as a good tool for crime or money laundering,” adding that “Even Christine Lagarde, president of the International Monetary Fund (IMF) recently called for more regulation of cryptocurrencies to counter illegal activities.”
Whilst the Chief Scientist acknowledges that bitcoin can be used as a means to achieve greater anonymity whilst conducting transfers, Mr. Quirion states that “the facts do not support the theory” that criminal use of bitcoin is widespread.
“Pseudonymity” Deters Criminals From Widespread Adoption
Quebec’s Chief Scientist argues that bitcoin offers it’s users “pseudonymity,” rather than total anonymity, which detracts from its potential illicit utility.
According to a rough translation, Mr. Quirion quotes cryptocurrency analyst, associate researcher at the Montreal Economic Institute, Jonathan Hamel – who has argued that the public nature of bitcoin’s blockchain detracts from its anonymity. “Every transaction is transparent and public. They are indeed recorded in a kind of ledger whose copies are distributed among thousands of computers.”
Cryptocurrency analyst, Erwan Joncheres, is also quoted in the document as arguing that “The anonymity of bitcoin is a myth.” Mr. Joncheres has argued that bitcoin is “no more transparent [than] money, because you have to go through a platform where you have to give personal information,” adding that at a bare minimum, information pertaining to “the address of the transmitter and that of the receiver” is recorded by a third party that facilitates the transaction.
Illegal Transactions Comprise Less Than 1% of Bitcoin Circulations
The document points to research conducted by the “Center for Sanctions and Illicit Finance of the Defense of Democracies Foundation” that, after analyzing bitcoin transactions executed between 2013 and 2016, found that only 0.61% of trading transactions in the period were deemed to be associated with illegal activities.
The Chief Scientist also points to center’s findings that illegitimate transactions within the bitcoin economy are extremely centralized, further undermining the suggestion that illicit activities pervade the bitcoin economy. Said research indicated that less than 10% of anonymous free markets were responsible for 95% of illicit transactions involving bitcoin between 2013 and 2016.
As such, Mr. Quirion argues that “The claims of recent years that some of the bitcoins would be used to circumvent money-laundering rules must, therefore, be questioned.”
Money Laundering in Crypto “Anecdotal,” Says Researcher
Mr. Quirion similarly rejects associations between tax evasion and bitcoin, quoting Canada Revenue Agency Communications Officer, Karl Lavoie, as stating “It’s just like money and you have to declare what you’re doing with it.”
Mr. Jonchères has also dismissed assertions that bitcoin and money laundering go hand-in-hand, stating “I think that tax evasion and money laundering are anecdotal on cryptocurrency networks. Since bitcoin is transparent, it will be very easy to identify all the people trading on an online exchange or portfolio platform.”
The document concludes that “bitcoin is not above the law, nor is it a magnet for illicit transactions: it forms only a tiny part of the criminal money circulating around the planet” due to it being “less attractive for anyone who wants to make transactions without leaving a trace […] Ultimately, the user must also take responsibility, […] In case of loss or theft, there is no 1-800 number to recover its bitcoins,” Mr. Quirion stated.
Do you agree that mainstream claims that cryptocurrency and criminality go hand-in-hand are unevidenced? Share your thoughts in the comments section below!
Images courtesy of Shutterstock, www.scientifique-en-chef.gouv.qc.ca
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IMF chief Christine Lagarde has dedicated her latest two blog posts on the official IMF website to cryptocurrencies. In her latest post, she outlines multiple benefits of crypto and envisages a large-scale shift away from government-issued currencies towards cryptocurrencies.
2 Blog Posts Dedicated to Crypto
The managing director of the International Monetary Fund (IMF), Christine Lagarde, dedicated a blog post on the IMF website to the benefits of cryptocurrencies on Tuesday. This positive post follows her other post last month which she outlined the drawbacks from her viewpoint. Citing that she previously “looked at the dark side of crypto-assets, including their potential use for money laundering and the financing of terrorism,” Lagarde proceeded to say:
Here, I want to examine the promise they [cryptocurrencies] offer. A judicious look at crypto-assets should lead us to neither crypto-condemnation nor crypto-euphoria.
She acknowledged the many cryptocurrencies in circulation and said, “it seems inevitable that many will not survive the process of creative destruction.” According to Coinmarketcap, there are currently 1,568 cryptocurrencies.
“The crypto-assets that survive could have a significant impact on how we save, invest and pay our bills,” the IMF chief believes. “That is why policymakers should keep an open mind and work toward an even-handed regulatory framework that minimizes risks while allowing the creative process to bear fruit.”
Lagarde Explores Benefits of Crypto
The first benefit Lagarde pointed out was:
Crypto-assets enable fast and inexpensive financial transactions, while offering some of the convenience of cash.
She emphasized that “Some payment services now make overseas transfers in a matter of hours, not days,” adding that “If privately issued crypto-assets remain risky and unstable, there may be demand for central banks to provide digital forms of money.”
The next point Lagarde discussed was a potential balance in the financial landscape brought about by cryptocurrencies. While emphasizing her belief that “the fintech revolution will not eliminate the need for trusted intermediaries, such as brokers and bankers,” she detailed:
There is hope, however, that decentralized applications spurred by crypto-assets will lead to a diversification of the financial landscape, a better balance between centralized and decentralized service providers, and a financial ecosystem that is more efficient and potentially more robust in resisting threats.
No Immediate Danger
Regarding financial stability, Lagarde revealed, “Our preliminary assessment is that, given their still-small footprint and limited links to the rest of the financial system, crypto-assets do not pose an immediate danger.” Nonetheless, the IMF chief calls for regulators to remain vigilant of the potential of cryptocurrencies “to magnify the risks of highly leveraged trading, and to increase the transmission of economic shocks should they become more integrated into mainstream financial products.” She further described:
Moreover, banks and other financial institutions will face challenges to their business models, should there be a large-scale shift away from government-issued currencies toward crypto-assets. Regulators might find it harder to ensure the stability of a more diffuse and decentralized financial system. Central banks might have more trouble acting as the lender of last resort in case of a crisis.
What do you think of Lagarde’s latest assessment of cryptocurrencies? Let us know in the comments section below.
Images courtesy of Shutterstock and IMF.
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