2012-11-16 lowyinterpreter.org - Bits and pieces: Virtual money and terrorism

[julz]

Bits and pieces: Virtual money and terrorism

Simon Palombi
Simon Palombi is an intern in the Lowy Institute's International Security Program. He has previously interned with the UN Counter Terrorism Executive Directorate.
2012-11-16

http://www.lowyinterpreter.org/post/2012/11/16/Bits-and-pieces-Virtual-money-and-terrorism.aspx

...
The European Central Bank recently published an official study into digital online currencies, the first by a major financial institution.

Alarmingly, the report tends to play down the suitability of these currencies to terrorist groups. In particular, the report passes off legitimate concerns, such as those raised two years ago by the Financial Action Task Force (FATF), as 'negative press'. Indeed, the report fails to account for the development and increasing market for the digital online currency known as Bitcoin, and not only its potential for use to launder money (raised by FATF), but the access it provides to weapons available via online black markets.
...

However, while governments, such the US and Australia are aware of Bitcoin's potential to circumvent counter-terrorist financing measures, they have not moved fast enough to amend legislation and develop a solution. Australian counter-terrorist legislation is currently ineffective against Bitcoin because it defines electronic money as digitally stored money, either electronically or magnetically, that is backed by precious metals, or gold bullion.
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[BoardGameCoin]

What a hack piece. The FATF piece he cites as saying bitcoin is potentially useful to launder money doesn't even mention bitcoin. He's obviously threatened by something that may diminish the amount of controls he feels over the financial networks as a counter-terrorist financing consultant.

[julz]

Someone else on that site responds with an interesting counteropinion:

Simon Palombi overstates the threat from terrorist's use of Bitcoin. First, a key aspect of Bitcoin is that every single transaction made using the currency is held by every single user of the currency in what is known as the block chain. While the user and the unique address are disassociated if the correct precautions are taken, network maps based on transactions can be developed. Even if people are careful, their associates and the people they transfer money to may not be. This network map will be a big intelligence boost and large Bitcoin transfers will attract attention.

Second, for Bitcoin to have real world effects, it must cross into the physical somewhere and this is where traditional intelligence gathering, law enforcement and customs will continue to play a key role. Just as drugs are seized where some other currency is used, so too will drugs and weapons be seized if Bitcoin is used. Australian police have already made arrests where Bitcoin was used and the market place was on the anonymous TOR network.

Bitcoin poses challenges that need to be addressed but it may not be the game changer that the author implies.

from http://www.lowyinterpreter.org/post/2012/11/16/Reader-riposte-Bitcoin-and-terrorism.aspx