A working draft from the European Union Parliament on crypto-currencies came suggests the owners of crypto-currencies and amounts needs to be known. The transfer of money needs to be regulated to prevent fraud but tracing every transaction back to an individual is not fully possible with crypto-currencies. The pseudonymous nature of bitcoin is built into the protocol and cannot be removed without dismantling the service.
“To combat the risks related to the anonymity, national Financial Intelligence Units (FIUs) should be able to associate virtual currency addresses to the identity of the owner of virtual currencies”
EU Parliament

Right now, Bitcoin isn’t Fully Anonymous

Bitcoin is anonymous until an action is taken that makes it not anonymous. A purchase of bitcoin through a service like Coinbase removed the anonymity of the coins as they can be traced back to the user. If a user converts their bitcoin to fiat currency via a bank then the coins are no longer anonymous.

If a user uses a bank account to purchase their bitcoin that transaction is recorded and investigators can go to the bank and request the users’ identity. If a user sells bitcoin for fiat money back to a bank then this transaction can also be tracked back to the user.

Right now, the only anonymous transactions are the coins that are generated by the miners and any transaction that happens with cash.

Governments require banks to keep records on their customers and watch for signs of money laundering and fraud.

Comparison to Prepaid Credit Cards

The report also compares the connection between crypto-currencies and prepaid credit cards. In my opinion, prepaid credit cards are more anonymous than bitcoin. Prepaid cards can be bought easily with cash and the records of the transactions are kept by private financial companies. If a government agency wanted access they would need to get the records from the banks.

With the blockchain, transaction data exists in a public ledger where anyone would have access to see where the money came from and where it went. To find the identity of a person they could follow the money to see where it was deposited or who originally purchased the coins and work forward.

Prepaid credit cards are not just used for money laundering and scams. People who do not have access to financial services use prepaid cards to make transactions online. These users would be better off purchasing bitcoin to make transactions as the fees would be lower.Regulation of the transfer of value helps prevent money laundering and scams and it is positive that the European Union is looking into how they can regulate bitcoin but the

It is good that the European Union Parliament is researching bitcoin but the text in this document shows a clear misunderstanding of how bitcoin works. I understand the need to prevent criminal activity in the bitcoin environment, but the EU suggesting that all users and transactions should be identifiable shows a lack of knowledge on the topic of crypto-currencies.

It is good that the European Union Parliament is researching bitcoin but the text in this document shows a clear misunderstanding of how bitcoin works. I understand the need to prevent criminal activity in the bitcoin environment, but the EU suggesting that all users and transactions should be identifiable shows a lack of knowledge on the topic of crypto-currencies.