It's been (incorrectly) said that the genius of Bitcoin is that every transaction is completely untraceable. What if the truth is actually the opposite: the genius of Bitcoin is due to the fact that every transaction is entirely traceable in a public ledger?
Bitcoin may have the potential for anonymity. But it may also have the potential to help government monitor how people spend money.
There is at least one private company - Coin Validation - that want to make use of the public Bitcoin ledger to create a centralized tracking system linking real identities with associated Bitcoin addresses:
Source: http://www.forbes.com/sites/kashmirhill/2013/11/13/sanitizing-bitcoin-coin-validation/
Bitcoin may have the potential for anonymity. But it may also have the potential to help government monitor how people spend money.
There is at least one private company - Coin Validation - that want to make use of the public Bitcoin ledger to create a centralized tracking system linking real identities with associated Bitcoin addresses:
Their plan is to compile a database of the known identities associated with Bitcoin addresses in the hope that Coin Validation will become the one-stop-identity shop for law enforcement when trying to find out who’s doing something nefarious with Bitcoin, while providing a red-flag system for businesses who have customers trying to use Bitcoin that’s associated with illicit use.
“Essentially, we’ve been working with regulators for a structured approach for Bitcoin customers to be compliant,” says Waters. “We set up an API to work with their systems and we supply reporting tools they need for their databases. Which bitcoin addresses belong to a person? That’s the problem we’re solving.”
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“People say Bitcoin is anonymous, but it’s also completely traceable,” says Guo. “Because the blockchain is already public, your privacy is limited, but a lot of people probably aren’t aware that they are being tracked,” adds Waters.
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Waters expects tensions. Bitcoin’s appeal to many early adopters after all was the freedom that came from its statelessness, its anonymity, and its decentralization. With Coin Validation, he’s proposing a centralized tracking system that he knows won’t sit well with some hardliners in the community.
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But what about Bitcoin laundering services and wallets designed specifically to make observation and tracking challenging?
“The average user is not sophisticated enough to launder Bitcoin,” says Guo.
“Typically people doing money laundering will reuse addresses or claim an address has lots of different identities,” says Waters. “This is a first step, not the silver bullet to end money laundering with Bitcoin.”
Source: http://www.forbes.com/sites/kashmirhill/2013/11/13/sanitizing-bitcoin-coin-validation/