- The U.K’s taxman clamps down on tax evasion and money laundering.
- HMRC offers $130,000 for anyone who can trace BTC, ETH, and an array of privacy coins.
- Will the UK become the next crypto hub?
The U.K.’s taxman is looking to crack down on private transactions. HM Revenue and Customs (HMRC), the tax authority for the U.K., has granted a bounty of $130,000 (£100,000) for anyone that can effectively track and identify crypto criminals. But what does this mean for privacy coins and financial anonymity?
HMRC is looking for an autonomous way to analyze seven of the major cryptocurrencies, including bitcoin, Ethereum and Tether. The agency aims to glean insight on cryptocurrency users to tackle tax evasion and money laundering.
Provision of a tool that will support intelligence gathering methods to identify and cluster Cryptoasset transactions into linked transactions and identify those linked to Cryptoasset service providers.
HMRC isn’t restricting the hunt to the seven pseudonymous coins but has extended the contract to include privacy coins such as Zcash, Monero and Dash.
’Cause I’m the Taxman, Yeah, I’m the Taxman
In a report by media publication, PublicTechnology, HMRC affirmed that the main intention behind crypto tracking was to uncover the intent of the user:
Many of these crypto-asset transactions are recorded publicly in a ledger known as a blockchain, Whilst the transactions are typically public, the participants undertaking them are not.
HMRC is offering a reward of $130,000 to any company capable of tracing cryptocurrencies. The company would be contracted for a year beginning Feb. 17. Interested partners have until the end of this month to apply.
Speaking to CCN.com, Marcus Swanepoel, CEO at bitcoin storage company Luno, noted that many monitoring tools already exist:
There are a number of blockchain and transaction monitoring tools available which allow every transaction inwards or outwards to be screened against known sanctioned addresses, high risk exchanges, dark web marketplaces, stolen funds etc. Transactions can be stopped and appropriate action taken on accounts which conduct illicit activity.
Nevertheless, the ability to track privacy coins has thus far evaded governments and analytics companies alike.
Is the U.K. the Next Cryptocurrency Haven?
Crypto analytic firms Ciperhtrace and Chainalysis have published well-received reports on the state of criminal activity within the crypto ecosystem. Most of the analyses have reported a significant amount of mischief.
One such report from Chainalysis found that $2.8 billion in bitcoin had been laundered via crypto exchanges in 2019. Of the washed billions, Binance and Huobi—unbeknownst to them—laundered more than half, citing a respective 27%, and 24% of illicit BTC.
At the heart of the scandal sat corrupt over the counter (OTC) traders—operating within exchange under the guise of regulated entities. In reality, these OTC desks are subject to less stringent regulatory policy than the exchanges themselves, providing significant scope for malfeasance.
Perhaps as a direct result of this, the U.K. has seen an uptick in its policing of cryptocurrencies. On Jan. 10, the Financial conduct agency (FCA) was officially confirmed as the U.K.’s anti-money laundering (AML) and counter-terrorist financing (CTF) supervisor for cryptocurrency business.
The FCA’s new regime appears ready to create some real change but this may be to the detriment of privacy-focused companies—and indeed privacy coins themselves.
The agency now demands a litany of requirements from existing and established cryptocurrency firms operating in the country. These include added financial and staffing requirements, as well as the need to “undertake ongoing monitoring
of all customers.”
Nevertheless, with the U.K.’s active role in enacting crypto regulation, the country could be on track to become a hotbed for crypto innovation.
This article was edited by Sam Bourgi.