Authorities in many countries worry that the cryptocurrency can become a haven for not wanting to share and pay taxes. Too late — it’s already happening.
Take, for example, David Break — Chairman of LDJ Capital and a famous fan of the blockchain technology. Capital family companies, cryptocurrency and blockchain-investment is more than $10 million . It uses digital money, offshore Bank account, thus saving the profits of the business and reducing the amount of funds coming into the state Treasury through taxes.
British Prime Minister Theresa may and Prime Minister Narendra modi among the first world leaders who expressed concern about the widespread adoption of cryptocurrencies, as it gives the opportunity to withdraw money offshore. At the session of Congress in January, the US Treasury Secretary Stephen Mnuchin urged 20 of the world’s largest economies to join forces and work to ensure that cryptocurrencies are not “become another Swiss Bank account”. Fears arose after the application of harsh measures against tax havens in the traditional banking sector has been very successful and it became obvious that businesses will begin to seek other ways of tax evasion.
“Each country is trying to find the answer,” said Drake, in the number of clients which consists of 25 public and private companies. “Needs to be adjusted structure, which will save the industry.”
The first people who practiced money laundering, were criminals, and their participation has grown steadily, according to a three-year study by the National endowment for democracy, a non-partisan analytical center of Washington. Next came such users as Drake, who said he follows the law of the United States, reporting on holdings of his company. Drake said that the regulation will help to legitimize the industry.
Growth in demand
The demand for new ways to hide assets has increased after American and European regulators tightened supervision over the activities of conventional financial institutions. They made the necessary compliance with the rules “know your customer” anti-money laundering and forced offshore financial institutions to disclose information about the client. The campaign has prompted many big financial firms to limit access of customers to Bank secret system of Switzerland. It is now more difficult to hide funds from the government, the courts, spouses or other prying eyes at home.
Cryptocurrency exchanges follow certain rules, but enforcement of these rules was not followed, particularly outside the United States.
The use of virtual money storage assets in the offshore is rapidly evolving with the introduction of these coins as zcash for and Monero, which use the encryption method does not allow to track their location. According to a new York firm “Grayscale Investments”, which runs an investment Fund zcash for Trust, about $10 trillion. is stored in the global offshore. According to Matthew Beck from Grayscale, by 2025, 10% of all offshore funds may be zcash for.
“The first time anyone in the world can keep their money confidentially, without involving a Bank,” said Beck. “Privacy is a scarce resource, and people are willing to pay for it.”
While zcash for touts the invulnerability of its encryption technology, Beck argues that government oversight is still necessary.
“We do not believe that this ecosystem can develop without regulation,” said Beck.
Tracking information is available
Bitcoin, the popular cryptocurrency is anonymous, although her movements can be traced via public electronic journal of the blockchain, which records every transaction. Despite the fact that all of the identified buyers and sellers are sets of letters and numbers, law enforcement has developed technology to monitor illegal bitcoin.
Existing laws require banks to report suspicious activity, including the withdrawal of more than $9 999 , and from cryptocurrency exchanges to maintain and retain records of any transaction. According to experts, there is software that after purchase of the bitcoins can easily trace its owner.
Research in the field of money laundering showed that the government should monitor the criminal use of crypto-currencies, but at the same time to respect financial innovation. First of all, as studies have shown, the regulators should consider full replacement of the cryptocurrency. They can’t.
“Maybe we need to learn from the experiences of other payment systems,” said Yaya’s Fanesi, who was a co-author of the study. “When I got out the credit card was abused, was a fraud, is still there. But we figured out how to deal with them.”
The study looked at the laundering of money through ATMs, stock exchanges, gambling and “mixers” – services that can convert one digital currency into another. It was discovered that illegal use has been steadily increasing between 2013 and 2016, time range of this test.
The study also showed that a cryptocurrency exchange based in Europe, took 5 times more illegal bitcoin than services in North America. Asia’s share of money laundering is small, although most of the transactions occurred there.
According to Drake, any rules must not only protect national tax interests, but to enable cryptocurrency to thrive and continue to innovate.
“It is important to distinguish between legal and illegal activities,” he said.