The European Commission assessed the risk level of virtual
currencies and found them vulnerable due to features such as anonymity, yet the
practical threat of them being used for these for terrorism and money
laundering remains moderate.
Recently, the European Commission published the
Supranational Risk Assessment Report (Report) in which it assessed risks
factors that pose threats to EU markets and cross-border relations, such as
money laundering (ML) and terrorist financing (TF).
The Commission analyzed the risks of different sectors and
financial products, including virtual currencies, and distinguished two
variables in the study: threat and vulnerability. The Commission concluded that
the actual threat of TF and ML related to virtual currencies is moderately
significant, but that the possible vulnerabilities posed by virtual currencies
are significant or very significant.
The Commission Staff Working Document, which accompanied the Report, noted that:
“LEAs [law enforcement authorities] have gathered some
information according to which terrorist groups may use virtual currencies to
finance terrorist activities. However, the use of virtual currencies requires
technical expertise which makes it less attractive.”
report continued, “few investigations have been conducted on virtual currencies
which seem to be rarely used by criminal organisations. While they may have a
high intent to use due to VCs characteristics (anonymity in particular), the
level of capability is lower due to high technology required.”
the Commission rated the threat of TF and ML related to virtual currencies was
moderate. The European authority, however, concluded that virtual currencies
are vulnerable to a significant degree to criminal and/or terrorist use. The
Commission highlighted that a lack of regulatory framework poses the greatest
risk for virtual currencies. It also stated that the inherent risks are “very
high due to the features of the virtual currencies (internet, cross-border and
anonymity).” This isn’t surprising as the anonymity debate has been echoing
throughout EU chambers.
March 2017, the European Parliament published the “Amending Directive (EU)
2015/849,” which stated that anonymity was one of the main hindrances to the
adoption of virtual currencies. As a result, EU officials proposed increased
transparency by trusted officials.
combat the risks related to the anonymity, national Financial Intelligence
Units (FIUs) should be able to associate virtual currency addresses to the
identity of the owner of virtual currencies.”
the results of the Commission’s threat assessment are not surprising. Recent
events have not exactly sold virtual currency to EU officials. After
the WannaCry ransomware crippled computer systems across Europe, EU
authorities took clear-cut steps to eradicate the possibility of criminal use
with virtual currencies.
a result, in June 2017, the EU announced a new initiative called TITANIUM
(Tools for the Investigation of Transactions in Underground Markets) that
calls for multiple EU law enforcement agencies, INTERPOL, and researchers to
work together to develop technical solutions for investigating and alleviating
the risk of crime and terrorism within the darknet markets and virtual