The EU wants to put an end to anonymous bitcoin transactions in a bid to track terrorism financing.
The European Commission has published an action plan for tackling terror groups’ funding, admitting authorities are struggling to keep up as criminals quickly adapt to new methods of moving money with less risk of being detected.
"New financial tools such as virtual currencies create new challenges in terms of combating terrorist financing. Highly versatile criminals are quick to switch to new channels if existing ones become too risky," it writes, adding:
For innovative financial tools, it is critical to be able to manage the risks relating to their anonymity, such as for virtual currencies.
The plan, launched following a plea from EU ministers, calls for virtual currency exchange platform to be included under the European Anti-Money Laundering Directive, enforcing more disclosure of who uses the services. The Commission is also considering including bitcoin wallet providers in this.
Virtual currencies are powered by the distributed ledger blockchain that has become the darling of financial world in the past year, with fintech startups and global banks alike rushing in to embrace the technology.
But the possibility of transferring money anonymously, without having to send it through a central third party, has also made bitcoin popular for more nefarious purposes.
The European Commission writes that cutting off sources of finance will “make a powerful contribution to the fight against terrorism”.