Bitcoin is having a hard time shaking off its association with criminal activity perhaps because it offers anonymity to its users - a feature that is often used in the mainstream media to slam the digital currency. But Bitcoin’s anonymity is, according to researcher George Danezis, no aid to thieves and launders who in practice find it quite difficult to exfiltrate the proceeds of their crimes.
Firstly, the innovation of Bitcoin is in the ‘Blockchain’ – a transparent, distributed ledger of all transactions - because every transaction is completely visible to all, it is perfectly possible to trace the path of stolen coins and find out the exact wallet address in which the coins end up.
It is then very hard for the thief to extract that value from the system because the wallet can be watched for further activity. Know Your Customer rules lie in wait at the ‘in’ and ‘out’ points, where digital currency meets FIAT. Banking systems, exchanges and payment processors all have to satisfy identity checks to avoid being shut down and these will inevitably expose the thief.
Furthermore, in a small community such as Bitcoin, moving large sums of money around is bound to attract attention. A common workaround is often attempted is called ‘Peeling’ – splitting a large sum into many smaller parts and moving these about to confuse the trail. The problem here is that if you can trace even one of these parts, you can trace them all, so it’s a high-risk strategy. In response ‘Mixers’ are becoming a popular tool to remain under the radar. This clever invention has a coin input and output and somewhere in the middle it forgets exactly which coins belonged to whom - but even this method has its drawbacks. Danezis tells us that by watching the mix and using ‘linear regression from equations derived over time’ it is possible to deduce which inputs are linked to which outputs.
‘All of this illustrates just one point…that it is very difficult to exfiltrate the proceeds of crime’
So Bitcoin in itself isn’t inherently bad, in fact it’s pretty unsympathetic to thieves and launderers, much less so than cash for instance. It’s just that bad actors get all the press.
Many thanks to George Danezis and Professor Nicholas Courtois host of the UCL Bitcoin, Cryptography and Finance Multidisciplinary Research Seminar. Listen to episode 6 of the BitcoinUK Podcast for the full seminar 'Tracing Thieves and Launderers'.
Well there are lots of workarounds .
Lets say i steal some bitcoins, and they trace it and get to the point where it was sent to some exchange for cash. And they find my name on that bank account . So they will say that are my bitcoins? How they will prove it. What if on some point of the road they got spent by thief and found they way to me ? So there is no way they can say that bitcoins ware in my possession from the point they ware stolen ? Right ?
So basically there is no point in laundering bitcoin .
And even if u want to, just deposit to some casino, or dice game , and than cashout, u will get cashout from lots of deposits/hot wallet ... Its rly simple to launder bitcoin , if u rly need to.
