Bitcoin Exchange Highlights to Investors Currency’s Capability to Evade Sanctions
Cryptocurrency could be used to circumvent Iranian sanctions
A bitcoin booth at a consumer electronics vertoning ter Lasnaad Vegas. / AP
February 17, Five:00 am
The most well-financed startup ter the bitcoin industry boasted to investors that a major advantage of the electronic currency is that it can be used to flout international economic sanctions, according to an investor presentation obtained by the Washington Free Beacon.
Coinbase, which recently raised $75 million ter seed funding from vooraanstaand financial institutions such spil the Fresh York Stock Exchange, said one of the four fattest advantages of bitcoin is that it is “immune to country-specific sanctions,” citing Russia spil an example, te a PowerPoint presentation waterput together for investors by the company late last year.
Since bitcoin’s creation te 2009, the digital currency has become associated with a range of illicit activities, including money laundering, terror financing, and sanctions evasion. Coinbase, a bitcoin “exchange” where consumers can purchase and store the cybercoins, is working to reform bitcoin’s reputation and bring it to the mainstream.
The company recently came under fire for billing itself spil the “very first regulated bitcoin exchange” ter the United States te a January announcement. Days zometeen, the Fresh York State Department of Financial Services and the California Department of Business took the unusual step of publicly stating that Coinbase wasgoed not regulated te either state. Many state and federal regulatory agencies are still attempting to determine how to regulate the cybercurrency, according to experts.
Te the PowerPoint presentation, Coinbase stressed its relationships with regulators. One pagina touting the “safe” nature of the company wasgoed adorned with logos from the U.S. Treasury Department and the Fresh York State Department of Financial Services.
Mark Williams, a professor at Boston University who has written extensively about bitcoin, said Coinbase’s keuze to be the very first regulated exchange ter the United States shows up to be “false advertising.”
“Publicly, at least ter writing, [Coinbase is] stating that they want to embrace regulation to build up broader adoption ter the U.S. marketplace,” said Williams. “Ter reality what they do is they’re actually just perpetuating this kwestie that supuesto currencies can permit you to avoid currency limitations and other regulation.”
The law rigid Tripp Levy PLLC said earlier this month that it is presently “investigating” whether the company misled consumers about its status.
While Coinbase says it does not permit individuals living ter sanctioned countries to open accounts, consumers ter the United States and elsewhere can purchase bitcoins from Coinbase to use for commerce with Iran.
Iranian businesses have used bitcoin to evade economic sanctions. Morteza Rohani,the cofounder of an online Iranian shoe company, said ter an article ter the Village published this month that his business “experienced an enormous sales growth” from international customers after it embarked accepting bitcoin.
“Business made on Bitcoin is a volmaakt way for a country furnished with sanctions, spil cryptocurrency solves the problem connected with money,” said Rohani.
“I believe, this is only the beginning, and wij are ter the right direction. I am sure that everything switches te several years.”
Rohani’s company’s webstek instructs potential customers te the United States to use Coinbase to acquire bitcoins for purchases.
When asked about its comments regarding sanctions immunity, Coinbase said the lack of government controls wasgoed “one of the more revolutionary aspects” of bitcoin.
“[B]itcoin is an entirely decentralized, open payment network, spil such, it cannot be managed by a country or any other central authority,” said a Coinbase spokesperson. “This is ter stark tegenstelling to traditional fiat currencies, and one of the more revolutionary aspects of bitcoin more generally.”
The spokesperson also emphasized Coinbase’s efforts to become a regulated exchange ter a statement.
Because the currency is anonymous and lightly transferrable, it is the preferred currency for some criminals and has become associated with the drug and lovemaking trafficking trades.
Earlier this month, the proprietor of Silk Road—a bitcoin-only marketplace for illegal merchandise that wasgoed shut down by the federal government last year—was convicted of numerous criminal charges, including drug distribution, for his role te the operation.
Other similar bitcoin-only outlets have appeared te Silk Road’s wake. One such clothing is DarkLeaks, a fresh black market for confidential and proprietary “information,” including state secrets.
Experts said bitcoin exchanges still carry many risks for consumers, including the currency’s market volatility, the potential for electronic theft from hackers, and the inability to recoup fraudulent charges.
Even spil Coinbase has promoted the unfettered nature of bitcoin, it has worked to give consumers and investors the impression that the company is securely regulated, describing itself spil the “very first regulated bitcoin exchange te the U.S.” on its webstek.
“Coinbase Exchange provides a reliable and secure verhoging for bitcoin trading,” said Coinbase, noting that one of its seed investors included the Fresh York Stock Exchange.
Days straks, the Fresh York Department of Financial Services told the Fresh York Times that Coinbase wasgoed not regulated ter the state, and the California Department of Business issued a “consumer voorzichtig” noting that “consumers should be aware Coinbase Exchange is not regulated or licensed by the state.”
Coinbase said it is licensed te 16 other states. Most of thesis licenses were obtained te the last three months.
“I think thesis are pretty savvy people [at Coinbase] and they’re most likely the most upright, compliant, clean-cut people te the entire industry, but it did look like they were attempting to pull a quick one on the marketplace with this,” said David Yermack, a finance professor at Fresh York University’s Stern Schoolgebouw of Business.
Economic experts say the claims are misleading, and many of the problems with bitcoin—its use for illicit purposes such spil sanctions evasion, terrorism financing, and its risks for consumers—persist.
“Regulation can maybe give a degree of reassurance to everybody but if somebody indeed wants to use bitcoin to overeenkomst drugs or evade sanctions on foreign trade and investment, they most likely will be able to,” said Yermack “I think any company that aids and abets that is doing so at some risk.”
Williams said for the ogenblik there are few protections for consumers.
“Coinbase came out telling we’re going to attempt to legitimize [the bitcoin industry], we’re going to be up-and-up and semitransparent, we’re not going to be like all the others,” said Williams. “I would argue, time will tell, whether they’re truly going to be embracing regulation, consumer protection, truly caring about the consumer, or are they just going to be just another iteration of thesis exchanges, which exploit opportunities and take advantage of consumers.”