Criminals are funnelling billions of pounds of cash through bitcoin and other cryptocurrencies according to the head of the EU's top law enforcement agency,
Director of Europol Rob Wainwright has said that money laundering taking place via the unregulated digital cash could amount to as much as £4bn. That's around three to four per cent of the £100bn in illicit money sloshing around Europe.
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"It's growing quite quickly and we're quite concerned," said Wainwright on the BBC's Panorama show due to be aired tonight.
"They're not banks and governed by a central authority so the police cannot monitor those transactions," he said. "And if they do identify them as criminal they have no way to freeze the assets unlike in the regular banking system."
The UK is considering making amendments to EU anti-money laundering rules to make it apply to cryptocurrencies.
Wainwright said his law enforcement agency has identified that money mules are being used to cash out, converting bitcoin into fiat currencies in smaller amounts making it harder for police to track.
He called on the bitcoin industry to co-operate with the agency in tackling the issue, which is "growing quite quickly".
Cryptocurrencies are not directly regulated in Europe and it is still unclear among most financial regulators how they should be classified under existing laws.
"They have to take a responsible action and collaborate with us when we are investigating very large-scale crime," he said. "I think they also have to develop a better sense of responsibility around how they're running virtual currency."
"Who Wants to be a Bitcoin Millionaire?" will be broadcast on the BBC's Panorams show on BBC One at 8.30pm on this evening.