Digital Currency Inquiry Holds Hearings as Bitcoin Crime Connections Alleged
Friday 5 December 2014 @ 12.55 p.m. | Crime | Trade & Commerce
Previously we have posted on the Senate inquiry into digital currency which was referred to the Senate Economics References Committee (SERC) on 2 October 2014, for inquiry and report by the first sitting day in March 2015 (see our postSenate Announces Digital Currency Inquiry, May Reverse Controversial ATO Decision). As we reported in that earlier article, the announcement of the inquiry followed the Australian Tax Office’s (the ATO's) guidelines earlier in the year that "Bitcoin" and other digital currency payments should be taxed as “intangible assets”, meaning that companies dealing in such payments must charge GST on Bitcoin sales. Guidelines which raised concern in the digital currency industry and led to claims that many companies using digital currencies, particularly Bitcoin exchanges would be "uncompetitive with the global market."
Recently, on 26 November 2014, the SERC Inquiry held its first public hearings at around the same time as reports of Bitcoin usage being connected to illegal and criminal activity were emerging in the daily media.
The SERC Public Hearings
The SERC inquiry, chaired by Labor Senator Sam Dastyari, heard from various witnesses representing both the local and international interests. A variety of regulatory, security and entrepreneurial issues were addressed and among those reported as addressing the inquiry were Mark Pesce who is credited as a futurist, technical entrepreneur and virtual reality pioneer as well as senior lawyer Andrew Sommer.
A key matter addressed was the development of an effective regulatory system which would find the most appropriate definition of digital currencies for tax purposes, promote competition and growth in the industry, ensure ongoing financial industry (both traditional and digital) stability, protect consumers and secure against illegal activity, and incorporate digital currencies into Australia's national security framework.
Note: submissions to the inquiry closed on 28 Novemeber 2014.
Bitcoin Used For Criminal Activity
Various media sources have reported recently that the Australian Crime Commission (the ACC), is investigating the role of Bitcoin in connection with organized crime in an official operation reported to be called "Project Longstrike". Executive director of the ACC, Judy Lind is reported by website E & T as having revealed that investigators are monitoring the "misuse of virtual currencies to facilitate criminal activity" at both a national and international level.
The concerns are around the fact that the anonymous payments that systems like Bitcoin allow, make then ideal for illicit and illegal transactions. As E & T reports:
"The so-called 'cryptocurrency' allows users to make anonymous payments, which has raised concerns about criminals and hackers using it carry out illicit transactions, . . ."
Recent times have seen operations like Silk Road, which is known as a "darknet site", where people reportedly buy illegal drugs using Bitcoins, the subject of investigation and action by the ACC and the police.
Further, in October 2014 it is reported that police seized Queensland's first Bitcoin ATM apparently following reports that police suspected it was being used by ". . . a former motorcycle gang member to deal crystal methamphetamine".
E & T quotes the ACC's executive director further as saying:
"We know that virtual currencies including Bitcoin are used as payment methods to facilitate illicit trade on the darknet, . . . Organised crime groups continue to make use of darknets to harbour trading in illicit commodities, including child exploitation material, illicit drugs and firearms, stolen credit card and identity data, and hacking techniques."
Bitcoin Use Growing
Most sources report the use of digital currency as rising. Australia is estimated to have seven percent of the three billion pounds worth of Bitcoins now circulating globally. It is this growth in use that is said now to be attracting the attention of the politicians and authorities (attention such as the ATO guidelines and the SERC inquiry). Attention which will seek to regulate and facilitate the legal use of the digital currency as usage spreads from online retailers to real-estate agents and even to the local bar.
It will be interesting to see if the SERC Inquiry when it reports does provide a system which, as its Chairman is quoted as saying, will: "shake up [Australia's] stale banking industry", a regulatory system that is "policed [against] crime without restricting the currency".
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