When you hear the words Gibraltar, what words come to mind? For many readers, two words: tax haven.

With a population of 33,000, Gibraltar, a British overseas territory on the southern coast of Spain, is known as one of the world’s leading tax havens. According to Taxhavens.biz, Wikipedia’s Tax Information Wikipedia, “Gibraltar is also known to provide offshore services such as offshore company formation, offshore banking, insurance and investment fund management, among other services. Gibraltar’s economy is heavily dependent on its offshore financial sector.

However, things seem to be changing, and quickly. The leopard is desperately trying to change its spots.

Last year, after reaching an agreement with the UK on tax cooperation, Spain removed Gibraltar from its list of tax havens. The government of Gibraltar appears to be doing everything in its power to rehabilitate the country’s rather shady reputation.

Why, then, is Gibraltar poised to become Europe’s leading cryptocurrency hub?

In the last week of December, as reported by The Guardian, the government will soon allow conventional bonds “alongside major cryptocurrencies such as bitcoin and dogecoin.” Yes, dogecoin, the world’s first ‘coin’, something which, to quote its creators, was meant to be a ‘joke’. However, the link between crypto and money laundering is no joke. As cryptocurrencies offer great anonymity, they have become synonymous with money laundering. Today, with bitcoin and its 10,000 brothers, it has never been easier to send illegal funds anywhere in the world.

So Gibraltar, a place known (or once known) to provide a home for tax evaders, may soon offer a home for savvy crypto money launderers. Is this an exact hypothesis or a crude generalization? TRT World reached out to Nathan C. Goldman, an accounting professor at North Carolina State University and an expert on money laundering, for comment.

According to Goldman, cryptocurrencies “facilitate money laundering by providing a platform for private transactions to take place without the knowledge of the government and / or tax authorities.”

The parties “achieve this by first purchasing a cryptocurrency using the illicit funds. Exchanges often have variable and changing regulatory requirements, so they can switch between exchanges while still allowing these purchases. Parties also often buy lesser-known cryptocurrency which may have less oversight and visibility for authorities. Then the cryptocurrency that was purchased using illicit funds is used to purchase other cryptocurrencies. This helps to disguise the paper trail, allows illicit funds to be converted into a more well-known cryptocurrency, and improves the ability of funds to be moved to different countries.

Finally, Goldman added, “by using these cleaner cryptocurrencies, the parties can then use over-the-counter brokers to act as a middleman to sell the cryptocurrency, thereby allowing those funds to be cleaned up / bleached “.

Crypto for criminals is hyperbole

So why would Gibraltar, a country desperately trying to rehabilitate its image, seek to become a crypto hub? Some perspective is needed. Goldman pointed out the following: “It should be emphasized that cryptocurrency as a whole is not used for money laundering and that most people who buy and sell cryptocurrency do not launder money. ‘silver.”

However, concern has increased in recent years as more parties have been involved in cryptocurrency, the price has skyrocketed, and more parties are accepting cryptocurrency for payment (i.e. (ie gambling sites, Tesla, etc.). These elements have led governments like the United States to introduce stricter tracking and reporting rules for cryptocurrency. “

Carol Goforth, a leading expert on crypto asset regulation, appears to support Gibraltar’s decision. “I think the rhetoric about ‘crypto is for criminals’ is overkill,” she said. TRT World.

After all, she added, “a relatively small percentage (and according to analysis provided by Chainalysis declining) of crypto transactions linked to criminal activity.” Additionally, historically Gibraltar has a history of compliance with FATF anti-money laundering requirements and, in its most recent assessment (which dates back to 2019), had no record of funding the FATF. terrorism, whether through electronic money or otherwise. And although I am not an expert on Gibraltar law, I believe that a business using distributed ledger technology is considered a relevant financial business with KYC (know your customer) and AML requirements in place, in accordance with EU directives in this area. “

In the aforementioned Guardian article, Albert Isola, Gibraltar’s Minister for Digital, Financial and Utilities, told readers that Gibraltar may have been “a tax haven 20 years ago”, however, during in the years that followed, “the Territory has now overhauled its tax and information-sharing policies.

The introduction of crypto regulation, we are told, “has a similar effect: eradicating bad actors and providing insurance to investors.” For bad actors, Isola had bad news: “If you wanted to do naughty things in crypto, you wouldn’t be in Gibraltar, because the companies are licensed and regulated, and they’re nowhere else in the world.

However, just because a business is licensed and regulated, criminals can still launder money. “Of course,” said Goforth, “there are no guarantees in the world, but trade in Gibraltar is regulated and monitored.”

How will this affect the ability of criminals to, say, earn a living? Goforth responded, “Criminals are more likely to see transactions that do not go through intermediaries who are forced to collect credentials, keep records and share reports. The fact that Gibraltar offers a regulated environment will make it more difficult for criminals to use crypto rather than facilitate traditional money laundering or the financing of illicit activities. In his opinion, “Isola is right,” the bad guys should look elsewhere.

According to Dr. Goldman, “Licenses and regulations do not completely prevent companies from carrying out illicit activities. However, they probably mitigate these activities. Money laundering is not unique to Gibraltar, and it is possible that even after the reform it still takes place at levels than in many other countries. However, it should be noted that activities in Gibraltar have likely declined since their reforms took effect. “

So, it seems, contrary to popular belief (and objective reality), a leopard can change spots. A country once synonymous with shady business practices is changing its image. The government of Gibraltar appears to be embracing cryptocurrencies in the hope of preventing, rather than enabling, criminal behavior.

Source: TRT World