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Cryptocurrency: crime versus control, or the future of money?

Felicitas Colombo is a public affairs consultant for industries involved in ventures with regional and global impact (e.g. healthcare/alcohol/sports). She was the former Director of Public Affairs of CONCACAF, one of FIFA’s regional bodies. Felicitas is Argentinean and has resided in France, Mexico, and the United States.. She is currently completing an Executive Master of Public Administration at the London School of Economics that addresses fundamental socio-economic and political challenges through regulatory analysis and policy evaluation. She is interested in  governance, anti-corruption, and successful reform processes applicable in a broad range of public and private settings. She attended IACA’s Summer Academy 2017.

Information is power, and encrypted information is even greater power.

Bitcoin was launched at the height of the Great Recession in January of 2009. Carefully inserted into its genesis code, it reads: “The Times 03/Jan/2009 Chancellor on brink of second bailout for banks.” (Bitcoin wiki)

Driven in part by anger over the recent financial crisis, Bitcoin was created as a currency that was resistant to unpredictable monetary policies as well as to predatory politicians and bankers. Its mysterious architect, Satoshi Nakamoto, seems to have been motivated by politics, not crime.

He introduced the currency just a few months after the collapse of the global banking sector, and also published a five-hundred-word essay about traditional fiat currencies.

“The root problem with conventional currency is all the trust that’s required to make it work,[…]” he wrote. “The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust. Banks must be trusted to hold our money and transfer it electronically, but they lend it out in waves of credit bubbles with barely a fraction in reserve.” (Nakamoto, 2009)

Bitcoin has not just been a trendsetter, prompting an array of cryptocurrencies built on decentralized networks that operate through blockchain technology, defined by Newsweek as “the digital record-keeping apparatus at the heart of the cryptocurrency,” it has arguably become the gold standard of a fully decentralized monetary system. Furthermore, blockchain technology, and its revolutionary system of ledgers, has the potential to transcend as a trustworthy global protocol platform for transactions.

Even though not all of the functions of money are fulfilled by cryptocurrencies – they do not yet constitute a widespread means of payment, they are poor stores of value, and they are not units of account – for some devotees, cryptocurrency is like sovereign money.  

Virtual currencies have the same cost and convenience as cash — no settlement risks, no clearing delays, no central registration, and no intermediary institutions to check accounts and identities.

While cryptocurrencies typically offer users pseudo-anonymous transactions, traditional payment networks and financial institutions are still required to follow protocols to prevent money laundering and funding for criminal activity. Yet, cryptocurrency transactions are not ultimately more anonymous than cash, as the identity of the currency owner could potentially be traced back to a real-world identity. Cryptocurrency is appealing because it is virtual cash with unlimited and unrestricted reach.

Currently, users of cryptocurrency operate in a legal grey area due to the lack of regulatory guidelines. Most anti-money laundering and terrorist financing regulations fall within the international financial system and, therefore, do not include virtual currencies. The development of effective countermeasures to mitigate the misuse of cryptocurrencies remains at an early stage.

However, the challenges of cryptocurrency go well beyond the fight against crime and corruption. Bitcoin’s unique and widely accessible technology defies the very bedrock of the global banking system. (McGrath Goodman, 2016)

Investment in Fintech around the world increased dramatically from $930 million in 2008 to more than $12 billion by early 2015. (Accenture, 2015)

Systemic mechanisms driving cryptocurrency technologies (e.g. blockchain technology or subsequent developments), could open the door to the next stage of the global banking system. However, it also seems to have triggered an imminent threat of control within the status quo.

Governments can’t control them, can’t hack them and, most importantly, can’t regulate them… yet.

Cryptocontrol and sovereign authority

In 2003, an elite team at the US Department of the Treasury engineered the model used today to target, block, and freeze the finances of criminals through their personal bank accounts (McGrath Goodman, 2016).  This is how it works: “Treasury’s Terrorism and Financial Intelligence unit puts individuals and organizations on a blacklist, which is sent out to the world. Once on the blacklist, those targeted can no longer do business in US dollars, which are involved in roughly 88 percent of the world’s foreign-exchange transactions, according to Switzerland’s Bank for International Settlements. In other words, they cannot bank at most financial institutions […]” (McGrath Goodman, 2016).

This ability to financially disrupt and disable evil has more implications than meet the eye. Access to advanced technology and encryption tools that would allow the design of a bulletproof virtual currency that could circumnavigate the global financial system is available to all. The greater opportunity seems not only to step ahead of the Fintech curve of financial innovation but to improve on the risks of cash transactions.

The chairman of the Center on Sanctions and Illicit Finance at the Foundation for Defense of Democracies said that, “the biggest concern the US has about virtual currencies is that terrorists and other enemies might create one so powerful and so untrackable, that they’ll no longer need the global banking system, which the US uses to financially starve them,” (McGrath Goodman, 2016).

The real power of cryptocurrency won't be the number of people who invest in it but the number of people who transact with it. 

Due to the recent increased demand in Japan, Bitcoin was included under the country’s regulatory framework. On 1 April 2017, Japan recognized the cryptocurrency as legal tender and it is likely that this could happen elsewhere. (Graham, 2017)

In this context, Bitcoin has yet to reach the kind of scale that would remotely begin to rival the US dollar. The busiest week on record for the cryptocurrency, which occurred in 2014, came to $550 million, compared with $14 trillion of average daily US dollar transactions. (McGrath Goodman, 2016).

Hence, there are good reasons why other advanced economies may find it attractive to move away from the status quo on cash quicker than the United States. Moving to a less traditional cash society should be looked upon as a key strategic issue of financial hegemony and cryptocontrol.


Russia: the cryptoruble

Recognizing the importance of digital technologies in the financial world, Russia has decided that cryptocurrencies will be regulated and the national cryptocurrency, called the cryptoruble, will be created. The finance ministry and the central bank are currently working together to draft a bill to provide a basic legal framework for cryptocurrencies. (Helms, 2017)

Details regarding the cryptoruble are scarce, but it looks like it will be issued and tracked just like regular currencies.

“Rubles and cryptorubles will be able to be freely exchanged. But, to deter money laundering and black market activities sometimes associated with cryptocurrencies, there will be a 13 percent tax if proof of legal origin cannot be produced.” (, 2017)

Russia’s Minister of Communications and Mass Media said that Russia’s creation of the cryptoruble was for one simple reason: “If we do not, then in 2 months, our neighbors in the Eurasian Economic Community will do it.” (, 2017)

China: Bitcoin is king

Since the currency was launched in 2009, the Chinese market, where government interventions are common (Hawkins, 2017), represents a large percentage of all bitcoin trading.

“The share of the cryptocurrency that's traded via China's mainland currency escalated over the past few years, overtaking the US dollar as the dominant currency. From less than a 10% share in January 2012, the yuan now makes up nearly 100% of all bitcoin trading.” (Oyedele, 2017)

Not surprisingly, cryptocurrency came under pressure after the Chinese government announced it was investigating exchanges on suspicion of market manipulation and money-laundering. In February this year, the government warned that there would be serious violations for trading platforms that failed to abide by strict money-laundering regulations. In line with this, the two biggest exchanges in China announced that they would be suspending bitcoin withdrawals for some time. (Hawkins, 2017)

Most importantly, China's central bank has announced the completion of trials to create a blockchain-based cryptocurrency. “The trial included both traditional state-owned banks and newer private financial institutions and will connect to the Shanghai Commercial Paper Exchange to enable the digitization of bank bill payments through this new cryptocurrency. It will also make it easier for the central bank to monitor the money supply, and help it better assess risk in the financial system and track transactions across the economy,” (CHINA: Blockchain benefits come at a price, 2017).


Some governments have sought to limit the use of cryptocurrency, which they see as facilitating corruption, while also attempting to use the same technology to make the financial system more transparent and fraud-proof.

Existing cryptocurrencies may eventually be regulated and controlled in order to hinder criminal activity. Likewise, new encrypted cryptocurrencies may be established by governments as legitimate digital currency. However, as technological innovation is by definition unruly, it seems difficult to halt the development of new cryptocurrencies. The demand for free-flowing transactions and independence from central banking systems will further fuel these developments.

Perhaps most crucial is the evident tension between governments’ objective to make markets more efficient and their attempts to control cryptocurrencies for political and financial purposes.

Market efficiency arguably requires little government intervention, and blockchain technology seems to be conducive to this. If we are indeed heading towards a time of virtual currency, the responsibility of central banks might change and their independence to set monetary policy will need further reviews and protections from public scrutiny and political pressures. There may also be other implications, particularly in the context of anti-corruption and criminal activity.

Whether it’s unpredictable government interventions, certain markets driving the crypto-wave or debates within the cyber community about how cryptocurrency should be scaled, there are not yet clear trends despite the growing faith of crypto-aficionados.

Bitcoin’s original anarchic credo to trust in a more unregulated financial market is still in its inception stage and cryptocurrencies might just be a young and vulnerable mathematical code.

Yet, even if the seeming conversation centres on anti-corruption efforts and market stability, as cryptocurrencies become a more viable option of legal tender, the imminent underlying threat lies in the challenge to the existing order of fiat currency and central banks. While cryptocurrency rapidly evolves, the current global financial system’s status quo could be at risk and the opportunity to dethrone the US dollar as the international currency of choice for both official and unofficial transactions might be exposed.


Bitcoin wiki. Genesis block. Available at:

Nakamoto, S. (2009). Bitcoin open source implementation of P2P currency. Available at:

Accenture (2015). Growth in Fintech Investment Fastest in European Market, according to Accenture Study. Available at:

McGrath Goodman, L. (2016). Bitcoin is being monitored by an increasingly wary U.S. government. Newsweek Magazine. Available at:

Graham, L. (2017). As China cracks down, Japan is fast becoming the powerhouse of the bitcoin market. CNBC. Available at:

Helms, K. (2017). Russia’s Capital Discusses Issuing Moscowcoin Cryptocurrency. Bitcoin news. Available at: (2017).  Russia is considering an official cryptocurrency called the 'CryptoRuble'. Available at:

Oyedele, A. (2017). One country dominates the global bitcoin market. Business Insider. Available at:

Hawkins, A. (2017). Meet the millennials making big money riding the China;s bitcoin wave. The Guardian. Available at:

CHINA: Blockchain benefits come at a price. (2017, May 12). Oxford Analytica Daily Brief Service. Retrieved from

Reinhardt, U. (2010). When Value Judgments Masquerade as Science. The New York Times. Available at:

Roberts, J.J. (2017). Bitcoin site fined $110 million for money laundering, owner arrested for hacking. Fortune Magazine. Available at:

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