Criminals who believe that the anonymity of using cryptocurrencies such as Bitcoin will help cover up their illicit activities are actually putting their operations at risk of discovery and their identities uncovered. This was the statement made by an official of the U.S. Immigration and Customs Enforcement (ICE) during a Senate hearing on Oct. 2.
Matthew C. Allen is an Assistant Director of the Homeland Security Investigations, the investigative arm of ICE. During a hearing before the United States Senate Caucus on International Narcotics Control, he gave a briefing on the current state of affairs of his agency’s fight against the trafficking of illegal fentanyl from China.
Naturally, the topic on the use of cryptocurrencies in the illicit drug trade was also discussed. But contrary to the usual arguments of crypto critics, Allen views the use of cryptos by criminals as an opportunity for law enforcement agencies. As far as Allen is concerned, digital currencies can only provide what he terms as “pseudo-anonymity” to its users.
Matthew C. Allen stated:
“Despite the pseudo-anonymity and ease of transfer exploited by the users of Bitcoin and other virtual currencies, criminals still need to convert their cash into virtual currency or their virtual currency into cash. Whenever monetary exchanges are made, a vulnerability is created. This is the time when criminals are most susceptible to identification by law enforcement means and methods.”
Traditional Investigative Methods Still Work
Surprisingly, Allen stated that even surveillance, undercover operations, and other traditional investigative methods still have their use in uncovering crypto-fueled criminal activities. Of course, this type of investigations would yield the best result if partnered with more modern data analysis techniques.
Matthew Allen said:
“Utilizing traditional investigative methods such as surveillance, undercover operations, and confidential informants, coupled with financial and block-chain analysis, ICEHSI is able to disrupt the criminals and dismantle the TCOs, as well as the cryptocurrency exchangers who typically launder proceeds for criminal networks engaged in or supporting dark net marketplaces.”
Perhaps Crypto Critics Are Wrong
Crypto critics have been very vocal in their position that because of cryptocurrency’s anonymity, they are the perfect financial tools for cybercriminals and might even be used to finance terrorism. However, there have already been numerous testimonies by various government agencies saying that using cryptos may not be the best option for criminals and terrorists.
Aside from ICE’s statements, Yaya Fanusie, director of analysis of the Foundation for Defense of Democracies Center on Sanctions and Illicit Finance, shattered the myth that digital currencies make it easier to finance terrorism. Before the House Financial Service, Fanusie explained that using cryptos actually complicate terrorist operations as these groups usually operate in areas with unreliable technology infrastructure.
Fanusie explained that if they use digital coins, terrorists would need to travel miles to convert them to cash to fund their purchases, thus exposing them to a greater risk of exposure. When it comes to terrorism, Yaya Fanusie concluded that “cash is still king.”