The arrest of the CEO of a Bitcoin exchange on Anti-Money Laundering (AML) charges in January 2014 and the seizure of $28 million in bitcoins pursuant to a forfeiture order raised novel regulatory issues around this heretofore unregulated crypto-currencyalso known as virtual currency. As more commercial enterprises begin to accept this form of money for trade, its potential for AML risk needs to be addressed.
The Bitcoin Enigma
Bitcoins, unlike dollars or other traditional currencies, were created in 2008 as a digital currency, meaning they exist only as software as opposed to being minted as bills or coins. They can be used to pay for online transactions, and they are not issued nor controlled by a central body. A unique system for tendering and receiving digital currency payments exists, and recently, exchanges have been created for the purpose of trading in bitcoins. They have come under closer scrutiny during the past year as an increasing number of merchants accept bitcoins for everything from basketball tickets to small home appliances.
Will Bitcoins Get Mainstreamed?
With the opening of a bitcoin ATM last year in Vancouver and additional terminals unveiled in Toronto, Ottawa and Montreal since the beginning of this year, Canada has already taken the lead in advancing bitcoins as a mainstream currency. Retailers such as Clearly Contacts and Tiger Direct accept bitcoin payments, and a California Starbucks accepts bitcoins for tipswith a strong push underway to allow for a customers Starbucks card to be refilled via Bitcoin in the near future.
Bitcoin Investors Seek Regulatory Approval
The Canadian government is taking a wait-and-see approach toward Bitcoin while Germany has recognized it as private money, and China has banned its banks from dealing in it altogether. Two investors who are seeking regulatory approval for a Bitcoin exchange-traded fund have invested more than $1 million in BitInstant and recently participated in a panel at the New York Department of Financial Services seeking to determine how to regulate crypto-currencies.
U.S. Federal Banking Rules and AML Laws to Apply
Last March, the U.S. Treasury Department announced that federal banking rules aimed at suspicious dollar transfers would also apply to firms that issue or exchange money that isn’t linked to any government and exists only onlinei.e., bitcoins. This would include other lesser known crypto-currencies such as PeerCoin, LiteCoin and Ripple. Any organization dealing with crypto-currencies, whether as legal tender for trade or for exchange investment purposes would be wise to consult with GreenPoint Legals AML experts regarding risk ramifications involved in navigating these newly charted waters.
Peyman Khosravani is a global blockchain and digital transformation expert with a passion for marketing, futuristic ideas, analytics insights, startup businesses, and effective communications. He has extensive experience in blockchain and DeFi projects and is committed to using technology to bring justice and fairness to society and promote freedom. Peyman has worked with international organizations to improve digital transformation strategies and data-gathering strategies that help identify customer touchpoints and sources of data that tell the story of what is happening. With his expertise in blockchain, digital transformation, marketing, analytics insights, startup businesses, and effective communications, Peyman is dedicated to helping businesses succeed in the digital age. He believes that technology can be used as a tool for positive change in the world.
