An official of the US Security Service has recommended the regulation of cryptocurrencies with strong privacy features like Monero [XMR] and ZCash [ZEC] in other to prevent crimes. Robert Novy, the Deputy Assistant Director of Office of Investigations at US Secret Service on Wednesday delivered a written testimony to the House Financial Services subcommittee on the use of digital currencies for illegal purposes.
He advised the Congress to “consider additional legislative or regulatory actions to address potential challenges related to anonymity-enhanced cryptocurrencies.”
“Continued Congressional attention is warranted to ensure law enforcement agencies maintain lawful access to critical sources of evidence, regardless of where, or in what form, that information is stored.”
A representative from the Investigations division of the Immigration and Customs Enforcement, Greg Nevano was on hand to support Novy’s recommendation. In his response, Nevano explained that some newer cryptocurrencies contain features that make it difficult and complicated to trace them. According to him, these ‘anonymity-enhanced’ cryptocurrencies were a gateway for illicit activities in an effort to subvert legitimate law enforcement inquiries. Although it is more difficult to trace the movement of illicit proceeds using privacy cryptos, Nevano said that it is not impossible.
The Representative from North Carolina, Robert Pittenger, returned that this illicit use of virtual or cryptocurrencies has become a huge threat to national security.
The third witness in the hearing was Thomas Ott, associate director of FinCEN’s enforcement division. In his testimony, Ott observed that cryptocurrencies have facilitated the theft of huge sums of money in the recent past. “We have seen virtual currency exploited to support billions of dollars in what we would consider suspicious activity,” he noted.
According to him, FinCEN estimates show that $4 billion worth of cryptocurrencies have been used in the darknet since 2011. This value, however, pales in comparison to that moved through conventional means, which remains the primary means for financing illicit activities. He concluded:
“While traditional financial methods remain the primary vehicle for most illicit activity, FinCEN believes virtual currency presents specific illicit finance risks and that without vigilance and action, the scale of this activity could grow.”
Solomon Sunny is the market reporter for Smartereum, one of the global leaders in Ethereum, blockchain and currency news. He produces technical price updates on digital currencies and writes recent developments about blockchain.