Australia will be one of the first countries to regulate bitcoin and other cryptocurrencies under the guise of anti-money laundering and counter-terrorism laws.

The proposal comes following the release of a report from the Australian Transaction Reports and Analysis Center (AUSTRAC) that argues that “electronic, online and new payment methods” are posing an emerging terrorism financing risk.

“Terrorist groups engaged in radicalization, recruitment and communication online (such as through social media) are a particularly high risk of using online payments systems and digital currencies,” the report claims (pdf).

“While digital currencies have undoubted legitimate uses, the transfer of convertible digital currencies can occur without passing through the formal financial sector… this provides another tool for criminals and terrorist financers to move and store illicit funds beyond the reach of law enforcement and other authorities and purchase illicit goods and services,” the reported added.

While providing no hard evidence of bitcoin use in terrorism, AUSTRAC acting national manager of strategic intelligence and policy Brad Brown told Fairfax Media that there were examples of the misuse of bitcoin globally, including the inside scam of Mt Gox and the use of bitcoin to facilitate purchasing drugs at Silk Road.

“I think it’s important to regulate where there is a potential risk of abuse of money laundering and terrorism financing,” Brown added.

Australian Justice Minister Michael Keenan said that “The report recommends strengthening an already robust legal framework to respond to new and emerging threats…the government is committed to facilitating growth and innovation in this sector and appropriate anti-money laundering and counter-terrorism financing regulation will aid that development.”

Rubbish

While greater transparency and consumer protection in the bitcoin space is welcomed, the “Oh my god terrorists!” mentality that lets Australia regulate bitcoin under counter-terrorism laws is most definitely not. Let alone, that bitcoin is no more used than actual fiat currencies in terrorism funding — should the U.S. government curb printing notes given that hard dollars are the most favored method of financing terrorists?

Australian officials already has an extremely poor track record when it comes to bitcoin and other cryptocurrencies, including at one stage deciding to treat bitcoin as a good and impose a 10 percent tax on every transaction of bitcoin in the country under Australia’s Goods and Services Tax (GST).

Any move to control bitcoin under the counter-terrorism laws will simply make life even more difficult for Australia’s already small bitcoin startup scene and will ultimately end up with companies either closing down or moving offshore to escape the hands of a government that simply doesn’t understand how the bitcoin market works and its great potential going forward.

The move is nothing more than a great deal of rubbish.

photo credit: Bitcoin Mittelmeerlandschaft via photopin (license)