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Italian Authorities Issue Bitcoin Warnings, Urge Regulation

| Published on July 11, 2014 at 11:09 GMT

Three Italian institutions have issued new bitcoin warnings in recent days, calling for new legislation to eliminate loopholes and regulatory ambiguity.

The warnings come just weeks after Italian lawmakers met with a group of bitcoin advocates in a fact-finding session. Soon after that, on 1st July, the successful ‘No Cash Day’ event also saw bitcoin representatives advocating for the digital currency in parliament.

Bitcoin regulation urged

Speaking in an interview with Ansa.it, Attorney General of Rome, Luigi Ciampoli, warned that bitcoin could be abused by criminals engaged in money laundering, financing of terrorism, or mafia activities. He urged for regulation that would allow authorities to trace and identify all persons involved in digital currency transactions.

However, Ciampoli also made some relatively positive comments about bitcoin, saying that the system “has its own charm” and has the potential to simplify transactions.

Ciampoli stressed that the current legislative framework is vague and that the problem should be addressed by new, specific legislation.

He argued that the bitcoin system “does not provide ample clarity” and that it is difficult to identify subjects involved in bitcoin transactions, meaning the currency has potential be misused for illicit purposes. Ciampoli pointed out that bitcoin’s public ledger does not guarantee that each user can be identified, as new owners are identified by a numerical code, which is not a real identity.

The court, he said, would like to see “precise and rigorous” rules to counter crimes involving digital currencies. Furthermore, bitcoin offers an “interesting new perspective, the legitimacy of which seems to solicit appropriate legislation to shelter operators from uncertainty and poor visibility”.

Money laundering a concern

In a recent report on the Italian financial information system (FIU), the Bank of Italy also warned that bitcoin poses a potential risk and that it can be employed to circumvent money laundering regulations or funnel funds to terrorist organisations.

The FIU is currently examining bitcoin’s potential for illicit activities and looking at complaints involving suspect bitcoin transactions. Like Ciampoli, the bank warns that “bitcoin transactions, while recorded in an online database, do not identify the parties involved in the transaction”.

Anonymity blamed

This sentiment is shared by Colonel Albert Reda of the Guardia di Finanza, Italy’s financial police authority, which is currently the only institution in Italy with the authority and resources to deal with bitcoin.

Reda told Italian daily La Repubblica that bitcoin’s volatility poses a risk for investors and that its anonymity allows Italian residents to hold and transfer wealth anonymously. Reda said the Guardia di Finanza is involved in an ongoing investigation, but he said he cannot disclose any information.

He said that the absence of any form of regulation makes bitcoin a “potentially powerful tool for money laundering, drug trafficking and arms trafficking.”

Furthermore, the Tor network can be employed to obscure online identities of persons involved in bitcoin transactions, while the bitcoin public ledger does not include information such as names, addresses or beneficiaries, as bitcoin addresses are “simply numeric codes”.

CrimeItalyMoney Laundering

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