Dutch Central Bank Eyes Regulating Crypto Firms to Combat Money Laundering

December 12, 2018 | AtoZ MarketsDe Nederlandsche Bank reported that they are considering the idea of requiring crypto companies to get licenses if they want to operate in the country. According to the bank, such measures will help to combat bitcoin usage in money laundering and the terrorism funding. To qualify for a license, blockchain-based companies must report “unusual transactions” and know who their customers are.

Some Crypto Companies Were Accused of Money Laundering

Decentralized and anonymous nature of the cryptocurrency makes it a prime target for advanced money launderers. According to the recent Dutch media outlet report, ShapeShift AG company registered in Switzerland and operating out of the United States, allegedly processed over $9 million illegal funds since 2016. ShapeShift a web and API platform created in August of 2014 to provide instant Bitcoin and altcoin conversion to let people trade bitcoin and other virtual currencies anonymously. Nowadays the company made “Know Your Customer “(KYC) practice obligatory.

Another website called Backpage appeared on the U.S. government radar this spring due to the possible illegal services which page provided. Classified as the sex-advertising website used cryptocurrency exchanges to launder millions of dollars in bitcoin as the U.S. media outlet reported. Eventually, the online portal was seized by the U.S. government in April 2018. In their 93-page federal indictment, the US Department of Justice accused the online sex marketplace of money laundering, conspiracy, and facilitating prostitution. “Backpage furthered its money laundering through the use of bitcoin processing companies,” the Justice Department alleged. John Williams, the CEO of the Federal Reserve Bank of New York noted that persistent issues with scams, money laundering and terror financing crimes surrounding cryptocurrency are a major obstacle to mass approval.

Сriminality of Bitcoin Is Exaggerated

Christine Lagarde, president of the International Monetary Fund (IMF) called for more regulation of cryptocurrencies to combat criminal activities.

Although certain Bitcoin features such as anonymity, risky investing cause investors concern certain facts do not support the theory of criminal Bitcoin background. In his report, published in April 2018 the first Chief Scientist of Ministry of Economy and Innovation Rémi Quirion tried to dispel concerns about possible Bitcoin criminality. Quirion who is an outgoing Scientific Director at the Douglas Mental Health University Institute outlined that bitcoin is wrongly blamed to be used for money laundering and illegal activity. “Bitcoin is not above the law, nor is it a magnet for illicit transactions: it forms only a tiny part of the criminal money circulating around the planet,” his report stated. The first Chief Scientist explained in his paper that Bitcoin is used in illegal transactions quite rarely as it “is less attractive for anyone who wants to make transactions without leaving a trace.”

A similar outcome was brought by the blockchain analytics company Elliptic research. According to the company report less than 1% of all bitcoin activities conducted between 2013 and 2016 involved money laundering.

Most of the concerns about Bitcoin appearing are due to its anonymity. However, cryptocurrency specialist and an attorney at Cyberjustice Laboratory in Quebec Erwan Jonchères states, that it is a myth. Jonchères explained that Bitcoin cannot be called anonymous, because when you purchasing this crypto, “you have to go through a platform where you have to give personal information.” The crypto specialist stated, that if the user provides not his name, they “always know the address of the transmitter and that of the receiver.”

Another expert, Jonathan Hamel, an associate researcher at the Montreal Economic Institute confirmed that every Bitcoin transaction is “transparent and public” and recorded in a “kind of ledger whose copies are distributed among thousands of computers”

The claims of recent years that some of the bitcoins would be used in money-laundering must, therefore, be questioned. “It’s not an emergent phenomenon here and we do not have any records related to that,” says Sgt Geneviève Bruno. “The user must also take responsibility, said Hamel. “He must understand that no insurance will allow him to recover the sums lost”, he added. Some countries, like Algeria or Bolivia, are trying to ban Bitcoin, but Australia. Canada and certain European countries such as the UK, France or the aforementioned Netherlands have chosen the path of regulation.

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