Virtual Currency – Overview and Emerging Risks Whitepaper

We are proud to present a whitepaper on Virtual Currency published by the IAFCI Cyber-Financial Industry Group.

Technology is evolving at a very quick pace and within the constantly evolving world of cyberspace, financial transactions are occurring on a daily basis and at an accelerating rate. With the advent of smart phones, this includes the use of financial applications, internet-­‐based payment systems and virtual currency. Despite the name, virtual currency represents the very real world movement of funds in a relatively unregulated environment. The danger exists that such funds movements may be used for terrorist financing, human trafficking, money laundering, narcotics, or other crimes is very real. Law enforcement agencies in the United States are already seeing use of virtual currency by criminal groups.

Virtual Currency has origins within the realm of internet gaming. It has become popular through gaming platforms like Zynga and Second Life. Traditional gaming platforms were set up to allow the flow of money to move from  the user to the game platform as a means to enhance the gaming experience. Interactive, non-­‐goal oriented environments like Second Life introduced a new element to virtual currency. Second Life created a currency  known as Linden Dollars that allows the transfer of funds between players within the game environment. This allows for movement of money between users which occur outside of the financial industry, but still controlled (to  some extent) by the game platform. A court order may be effective in obtaining information from this type of entity if they are within reach of US legal jurisdiction.

To read the full whitepaper including obstacles to regulation, evolving criminal risks, investigative challenges and recommendations, etc., please click here to download the document in PDF format.

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