In Focus Risk
uses a currency known as the Linden dollar; Linden Labs is the maker of Second Life. The currency is traded and quite stable. Users of Second Life create an avatar that
represents their alter ego to explore the virtual world and interact with people. Suppose my avatar meets your avatar in a
virtual world and I give you some currency, which you then cash out in dollars or pounds. If the money I gave you came from my drug dealing, has an offence of money laundering been committed? If so, where? Who would report it? Who would investigate it? Where could it be tried? The emergence of new technologies presents challenges to our laws and legal system.
Bitcoin The currencies we have looked at, in this article, are all pegged to real-world currencies, but you can imagine the scepticism that existed when someone came along and said: “I am going to create a peer-to-peer currency that is based on nothing, no currency, no precious metal, no stocks. Its value will be the fact that it is limited, as there will only ever be 21 million made.” That is exactly what Satoshi Nakamoto, a pseudonym, did. He prepared a nine-page
November 2017
If the money I gave you came from my drug dealing, has an offence of money laundering been committed? If so, where? Who would report it? Who would investigate it? Where could it be tried?
paper describing how the currency would work. He said that current transactions across the web rely on third-party trusted entities, such as banks or credit-card firms, and that two people should be able to transact with each other without any trust; the transaction being protected by the mathematics of cryptography. Bitcoin was born. Ironically, like any fiat currency, Bitcoin
works because people trust in it. Now you can buy books on Amazon, pay for your university education, or pay for a Virgin Galactic flight!
www.CCRMagazine.co.uk
When I first started looking at Bitcoin, I
too was sceptical and did not rule out a fraud of massive proportions. However, now I believe that it is the biggest social experiment ever. Three years ago, I wrote an article and
there were 100 crypto currencies, today there are 1,100 and the number continues to rise. Whilst most of these are created for specific user groups, Bitcoin continues to be the most widely used, and, whilst the currency is volatile, the price of a bitcoin is now over £3400. The really exciting thing about crypto-
currencies is the blockchain technology they are based upon. This, in my view, is the greatest invention since the world wide web. It is the first time the human race has had a decentralised, immutable, transparent ledger, capable of processing computer code. Whilst most technologies are exploited by organised crime, the blockchain technology, being decentralised distributed ledgers, are less lightly to fall victim to criminals. Blockchain technology is in its infancy,
but it will grow exponentially and it is our responsibility to make sure we understand what it is, and how it works, in order to keep free from criminal abuse. CCR
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