The European Commission (EC) wants to end anonymous trading in cryptocurrencies in order to help track terror groups's funding.

The EC yesterday published an Action Plan to strengthen the fight against the financing of terrorism (PDF) that says criminals are quick to seek out new ways of moving money that offer lower risk of detection.

While the plan doesn't offer evidence of virtual currencies being used to finance terrorism, the EC is alive to the possibility and feels it is better to contemplate regulation as part of the ongoing effort to stop terror attacks.

The plan therefore calls for virtual currency exchange platforms to be brought under the scope of the European Anti-Money Laundering Directive, which would mean exchanges would have to report just who used their services and when they were used. The Action Plan says “The Commission will also examine whether to include virtual currency 'wallet providers'.”

Bitcoinistas needn't feel singled out by the EC: the Action Plan also calls for a re-think of how to and when identify users of pre-loaded credit cards, without reducing their utility for the many people (many of them poor) who find them a useful financial instrument because they operate as credit cards but don't require holders to be credit-worthy. There's also a call for a central register of bank accounts and account holders to be established in all European Union member sates.

Another item the plan calls for is scrupulous consideration of all transactions between EU members and states known to be good spots for money-laundering.

As with so many government responses to situations created by new technologies, this one looks worthy-but-probably-futile because virtual currencies make a virtue of privacy.

As Bitcoin.org advises, "To protect your privacy, you should use a new Bitcoin address each time you receive a new payment. Additionally, you can use multiple wallets for different purposes. Doing so allows you to isolate each of your transactions in such a way that it is not possible to associate them all together. People who send you money cannot see what other Bitcoin addresses you own and what you do with them."

Throw in the fact that plenty of virtual currency exchanges operate beyond the EU's regulatory reach and that such operators will find ways to make it possible to cash in cryptocurrencies inside Europe. Even if crimping cryptocurrencies successfully denies terrorists access to funds, the Action Plan predicts exactly what they'll do next: find a less-risky way to get their hands on cash.

At which point, presumably, another Action Plan will become necessary. ®