They say the reason crypto companies should get a license in order to operate is in order to make it harder to fund terrorism and making money laundering through crypto impossible. In order to qualify for the license crypto companies must report “unusual transactions” and know exactly who their customers are.
According to the Dutch Central Bank the regulation is necessary due to the huge number of money being laundered but how high is this number actually? According to an investigation over 88 million USD was laundered over 46 different cryptocurrency exchanges around the world in the past two years.
Companies like ShapeShift AG official incorporated in Switzerland but currenctly operating in the US has processed over 9 million USD in illegal crypto funds since back in 2016. The altcoin exchange service made it able for people to trade cryptocurrency anonymously making it perfect for money laundering. Very similarly to this is the sex-advertising website Backpage. After a while it turned out Backpage was using cryptocurrency exchanges to launder millions of dollars in bitcoin.
Eventually the truth revealed itself and uncle Sam didn’t like wat was going on. the US Department of Justice accused the online sex marketplace of money laundering, conspiracy, and facilitating prostitution and all of this in a 93-page thick federal indictment.
In order to foster its money laundering Backpage used bitcoin processing companies like Coinbase, GoCoin, Paxful, Kraken and Crypto Capital. They also used the accounts of third parties to route the money through, making it harder to trace down. The CEO of the Federal Reserve Bank of New York John Williams states, “The setup or institutional arrangement around bitcoin and other cryptocurrencies is problematic they have problems with fraud, problems with money laundering and terror financing.”
But money laundering has been around longer than bitcoin so the office of Quebec Chief Scientist Rémi Quirion stated “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.” And this is certainly true.
It is hard to estimate the total number of money being laundered around the world when it comes to fiat currency, but a well calculated estimate says it is around 2 to 5 percent of the global GDP which comes down to 800 billion to 2 trillion USD.
Compared to this number a couple million is peanuts but still a great way for banks and governments to put regulations on crypto. A similar report by blockchain analytics company Elliptic said that between 2013 and 2016 only 1 percent of all bitcoin activities involved money laundering.
Cryptocurrency is an attractive way of money laundering due to its anonymity but considering the huge number of money being laundered today with fiat currency a license for legitimate businesses seems like a high price to pay.
Are the institutional investors going to step in?
A lot of people in the crypto community agree on one thing, in order to make the price of bitcoin rise we are going to need the mass adoption to take place and in order to achieve this we need institutional investors to step in the game. There has been a lot of talk around the subject of traditional investors and banks stepping in but are these jus roomers or is the mass adoption closer than we think?