Problems of legal regulation of cryptocurrency and legalization of criminal proceeds, carried out with its help



With the development of digital technologies, the life of ordinary people has changed dramatically, these innovations and the economic sphere have not been spared. A large number of different virtual currencies called cryptocurrencies have emerged. These include Bitcoin, Ethereum, Ethereum Classic, Litecoin, Ripple and others. Today, there are more than 500 types of cryptocurrencies in the digital world.

Cryptocurrency is understood as digital currencies created on the basis of blockchain technologies (distribution network technologies), in turn, these currencies are not issued by central banks of states, are not attached to official currencies, are transmitted and stored electronically, and are voluntarily accepted by market participants as means of payment.

Virtual currencies, of course, speed up and greatly simplify settlements, excluding such familiar and traditional financial institutions, which, of course, cannot but affect their business models. The fact that in a short period of time blockchain technology will radically change the economic industry and become the main infrastructure of finance no longer requires proof.

However, one should not confuse cryptocurrency and electronic money. The latter are only an electronic embodiment of real money deposited into a specific bank account. Cryptocurrency, on the other hand, is issued on the network and has absolutely nothing to do with any of the state currency systems, it, in fact, is just a record, which a single register takes into account the belonging of coins to a specific address in the network.

The economic essence, concept and legal status of cryptocurrency are currently the subject of rather heated discussions among American experts, everyone is worried about the appearance and popularity of this financial instrument, which is a fundamentally new trend both for the world in general and for our state in particular.

Questions are raised about the formation of a new currency, its legal regulation, liquidity and profitability as an investment object and the potential to replace legal currency.

According to experts of the analytical credit rating agency, investments in virtual currencies by American residents amount to about 7.5-14 billion US dollars.

The first country to legalize cryptocurrencies was Japan. In the USA, Hong Kong and Singapore, they are perceived as a new financial instrument, in a number of EU countries they are still wary of cryptocurrency litecoin price and it has not received its status at the legislative level. However, in countries such as Bangladesh, Bolivia and Ecuador, the circulation of cryptocurrencies is prohibited at the legislative level.

Due to the absence in American legislation of norms regulating the legal status of cryptocurrencies, as well as the absence of a direct prohibition on their use, in legal reality a number of law enforcement problems arise, because with the advent of the new currency, criminal threats to the country’s economic security have arisen, associated with the penetration of foreign criminal capital into the national economy with its subsequent withdrawal from the jurisdiction of America just with the help of cryptocurrencies. Another of the key features of the use of cryptocurrencies is the anonymity of the persons using them, in addition, the cryptocurrency does not require the maintenance of special reporting documentation.

Almost all of the cryptocurrencies existing today use blockchain technology, which consists in using the so-called distribution network. There are three types of networks: centralized, decentralized and distribution. However, if centralized and decentralized networks are the usual and classic networks for the economy, then the distribution network is an innovation.

The essence of a centralized network is the presence of a central counterparty through which all operations and transactions, flows of financial resources and information pass. The algorithm of work of a decentralized network is characterized by a branched structure, consisting of several large nodes and central counterparties, necessary to work with regional counterparties.

Unlike the above-mentioned networks, the distribution network is characterized by the absence of intermediaries and centralized agents, the hierarchy between the participants disappears, their anonymity appears, and all counterparties become equal, thus, the blockchain is understood as a chain of transactions built from blocks. However, it is necessary to note a clear “plus” of the blockchain system, because due to the fact that the technology is applicable for storing data on financial transactions, legal obligations and property rights, it ensures data transparency and accessibility to their familiarization.

However, the introduction of cryptocurrency into criminal schemes designed to hide criminal proceeds will significantly complicate the process of proving the commission of crimes provided for in Articles 174 and 174.1 of the Criminal Code of the American (hereinafter – the Criminal Code of the American Federation). First of all, this is due to the fact that it is not possible to track the movement of funds, which are incomes received from criminal activities, converted into cryptocurrency, because such incomes have a high degree of anonymity. The possibility of uncontrolled transfer of criminal proceeds abroad for the purpose of their further cashing is a prerequisite for a high risk of involving cryptocurrencies in schemes of “laundering” criminal proceeds.

Criminals began to actively use programs for virtual currencies, the so-called “mixers”. Such services are anonymizers and provide hiding of the chain of operations in the block chain by binding all operations to one bitcoin address.

The use of “mixers” makes it extremely difficult to link specific virtual money to a specific transaction, since one transaction is mixed with the transactions of other users in such a way that it becomes unclear to whom the user is sending funds.

Of course, the decentralization of the Bitcoin network is attractive to professional legalizers; it is necessary to take into account the fact that money laundering technologies are improving every day. Legalizers complicate the processes of identifying, disclosing and investigating criminal schemes and systems for withdrawing and cashing funds.

The current situation testifies to the urgent need to legislatively regulate the legal status and circulation of cryptocurrencies by adopting an appropriate federal law. The first steps to prepare the domestic legal system for the adoption of the Federal Law “On Digital Financial Assets” are actively being taken by the legislator. So, from October 1, 2019, we will have a number of changes in the Civil Code of the American (hereinafter referred to as the Civil Code of the American Federation), in particular, digital rights will act as a new object of civil rights.

Now in the Civil Code the concept of digital rights will be given, as well as a new rule on “electronic” transactions will appear. These rules will apply to legal relations that arose after October 1, 2019.

The purpose of these changes is to prepare the Civil Code of the American for the further adoption of laws on digital financial assets (in particular, cryptocurrency and tokens) and crowdfunding (attracting investments through electronic platforms). Currently, these bills are awaiting a second reading.

However, given the difficulties associated with the control over financial transactions to transfer legal currency into cryptocurrency, it seems necessary to consolidate the status of cryptocurrency in the Criminal Code of the American and anti-legalization legislation, which requires high-quality scientific, methodological and information support on this issue.


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