Systems for virtual currencies, largely perceived as an alternative to crisis stricken traditional banking, are now pressed on all fronts. Since US federal prosecutors halted digital payment network Liberty Reserve, the Bitcoin currency is now under fire.
The largest exchange of the digital Bitcoin currency is now
requiring all accounts to be verified as the US piles the
pressure on the coin.
US authorities shut down Liberty Reserve for being a large money
laundering scheme. The Costa Rica-based company is charged with
running a “$6 billion money laundering scheme and operating an
unlicensed money transmitting business,” Preet Bharara, U.S.
Attorney for the Southern District of New York said. Liberty
Reserve was tailor-made for criminal transactions and
money-laundering, facilitating “a broad range of online
criminal activity, including credit card fraud, identity theft,
investment fraud, computer hacking, child pornography, and
narcotics trafficking,” according to the indictment. The
Liberty Reserve system handled huge amounts of money outside the
control of national governments, as it was not registered with US
authorities. On top of that, it did not require proof of identity
for users.
“Through what happened to Liberty Reserve, it (Bitcoin) will be
hurt, as alternative currency under this big heading,”
Christopher Hartwell, Senior Research Fellow of the IEMS of the
Moscow School of Management SKOLKOVO, told Business RT.
“Bitcoin will survive, but is it going to continue growing in
its demand? It’s going to become more of a target in terms of the
governments looking at it,” the SKOLKOVO expert added.
Virtual finance: viable alternative to traditional one?
With the central banks around the world now putting increasing
pressure on normal depositors, virtual currencies have been
growing exponentially. One recent example came after the financial crisis in Cyprus, when people with
deposits above 100,000 euro were deprived of up to 30% of their
savings. This shook faith in traditional banking and made Bitcoin
an overnight sensation. Its exchange rate swung by hundreds of
dollars in a few hours, ranging from between $100 and $140,
according to bitcoincharts.com. The numbers are really high for a
currency that relies on an electronic code and a network of
anonymous helpers instead of a central government.
“… global central banks are coming out and saying: we have the
policy that’s going to make your money work less, so people are
looking to other channels to look towards,” said Hartwell.
Despite all the scrutiny virtual currencies are now facing,
“they are going to be more sophisticated, they are going to be
different from Bitcoin,” the SKOLKOVO expert said.
“We’ve just started that tinkering experiment with the limits
of that free banking of alternative currencies. … They are going
to be better and tougher to get into, we are going to see more
proliferation in the future. ”
The official stance is not that optimistic, with the US
authorities claiming they are well prepared to combat global
illicit finances. Mr Bharara classified the Liberty Reserve
indictment as “an important step towards reining in the ‘Wild
West’ of illicit internet banking.”
“As crime goes increasingly global, the long arm of the law
has to get even longer, and in this case, it encircled the
earth,” he added.
Though posing greater competition among currencies, the virtual
ones are not going to replace key traditional means of payment,
especially the US dollar.
“The thing is that the US dollar remains the soundest bet
around — it’s the best of a bad lot. Do you see what’s happening
to the euro? Still going on. Cyprus — still shaking up. Greece —
still shaking up. The euro was going to replace the dollar and
it’s not. There’s really nothing out there that’s going to take
the dollar’s place,” a SKOLKOVO expert concluded.
This article originally appeared on: RT