VIRTUAL CURRENCIES UNDER CAREFUL OVERSIGHT

Updated: 06/05/2013 16:36
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The virtual currencies that are often supposed to be a strong alternative to traditional banking system stricken by crisis are now pressed from all...

The virtual currencies that are often supposed to be a strong alternative to traditional banking system stricken by crisis are now pressed from all sides. Since US federals blocked digital payment network Liberty Reserve, the Bitcoin seems to be the next target.

One of the largest exchange of the digital currency is now requiring all Bitcoin accounts to be verified as the US build the pressure on the coin.

US authorities shut down LR for allegedly being a money laundering scheme. The Costa Rica based company is charged for "$6 billion money laundering scheme and operating an unlicensed money transmitting business," Preet Bharara, U.S.

Attorney for the Southern District of New York said. According to indictment Liberty Reserve was made particularly for criminal transactions relieving broad range of online criminal activity, including credit card fraud, identity theft, investment fraud, computer hacking, child pornography, and narcotics trafficking". LR managen big amounts of money that were out of control of national governments, was not registered with US institutions and did not require proof of identity for its users.

“Through what happened to Liberty Reserve, it (Bitcoin) will be hurt, as alternative currency under this big heading,” Christopher Hartwell, Senior Research Fellow of the IEMS of the Moscow School of Management SKOLKOVO, said.

While most banks from around the world increasing pressure on normal depositors, virtual currencies are gaining more attention and interest. Just remember the recent bank crisis in Cyprus. It shook faith in traditional banking and currencies, and made Bitcoin an immediate sensation in one night. Its exchange rate rocketed by hundreds dollars in a few hours, ranging from between $100 and $140, according to bitcoincharts.com.

Despite of all the scrutiny most virtual currencies are facing, “they are going to be more sophisticated, they are going to be different from Bitcoin,” the SKOLKOVO expert said.

They are going to be better and tougher to get into, we are going to see more proliferation in the future.”

The official stance is not that optimistic, with the US authorities claiming they are well prepared to combat global illicit finances, meaning virtual currencies mostly. Mr Bharara classified the Liberty Reserve indictment as "an important step towards reining in the 'Wild West' of illicit internet banking."

"As crime goes increasingly global, the long arm of the law has to get even longer, and in this case, it encircled the earth," he added.

Though posing greater competition among currencies, the virtual ones are not going to replace key traditional means of payment, especially the US dollar. “The thing is that the US dollar remains the soundest bet around – it’s the best of a bad lot. Do you see what’s happening to the euro? Still going on. Cyprus – still shaking up. Greece – still shaking up. The euro was going to replace the dollar and it’s not. There’s really nothing out there that’s going to take the dollar’s place,” a SKOLKOVO expert concluded.


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