If True Value of Cryptocurrency Is Freedom, Why Do We Need to Regulate It?
Regardless of how you see the future of cryptocurrencies, one thing that needs to be addressed urgently is ensuring compliance with national laws.
Food for Thought
Like many technological advantages before it, cryptocurrencies represent massive strides forward in social, economical and technological advances for all of us.
To be clear, this reflection shouldn't be taken from a technical stand point, the technical debate around cryptocurrencies is long and in depth and best reserved for another time. This review should be undertaken at a much more top level.
Something fundamentally mind blowing
Better explained sticking with the aircraft analogy, most of us don't know (or care) how the jet propulsion engine works, but we still happily drink a Gin and Tonic at 40,000 feet while heading off to our next vacation.
The same is true of the cryptocurrency. In the future, and indeed today, many individuals will use these technological advances with little to no understanding of the technology behind it. Of course, those of us who follow technology closely will know this ignorance doesn't come from not caring how it works, its the opposite, its putting total faith in the system working, and working well.
Let's put it this way, much like the combustion engine or the turbo prop doesn't show us what the car or aircraft truly represents, much of the technology behind the cryptocurrency doesn't show us its true value. Freedom. Freedom to trade across borders with anyone for anything. Now Stop. Think about this for a moment. For the first time in the history of mankind since the “Gold Coin,” the same currency can be used in Moscow to pay for flowers that can be used in Johannesburg to buy a new TV (although, yes, gold coins were not used to buy TV's).
Further to that, the concept that my money is worth as much in Downtown London as it is in Uptown Singapore is fundamentally mind blowing. A future in which you are as rich in Dublin as you are in Mumbai is an exciting one that can only help to unify and grow both commerce and the world closer together.
However, as the cryptocurrency “grows up” it has had to overcome some serious compliance and regulatory problems internationally. These regulatory issues are numerous in nature depending on which country you read this in. Yet one problem seems to slip under the radar time and time again. Money Laundering.
For those of you reading this in certain jurisdictions that don't have laws against Money Laundering, the concept of Laundering is taking funds gained from illegal sources and “filtering” (or as the name implies “laundering”) them to appear as a legitimate source of income. With the rise of much smaller cryptocurrencies in the last few years, money laundering investigators and enforcement agencies are struggling to keep up.
As an example of this, the US Department of State (INCSR) identified countries such as Canada, Germany and even France as those of “Primary Concern” for money laundering purposes. To put this into perspective, these countries feature on the same list as countries like Iraq, Afghanistan and Guatemala.
While its true there are a number of reasons those countries are included on that list, such as the volume of money attributed to serious organized crime, and various other elements, we would be remiss if we did not seriously consider сryptocurrencies role within the battle against money laundering.
For anyone who doubts that cryptocurrencies pose a threat with respect to money laundering, on June 27, 2017 a man was arrested in Greece for money laundering $3 bln through the use of cryptocurrencies. More than just pushing a few hundred dollars worth.
Therefore, regardless of how you see the future of cryptocurrencies, one thing that needs to be addressed urgently is ensuring compliance with national laws, enforced with a strong anti-money laundering methodology.
Companies such as Gresham International have been working with ICO's for the last two years helping new coin offerings to develop compliance frameworks and impact assessments in money laundering hot spots (through more than just simple words in their White Papers).
Additionally, they have been taking steps to assist operators of those more well-known currencies to put in place safeguards to assist with making cryptocurrencies safer. In doing so, they are trying to highlight the positives of using a digital based currency over the traditional tangible cash we are all used to.
Tackling money laundering
After all, the reality is that money will be laundered regardless of if it is digital or tangible in nature. It's illegal. Where there are laws, there are crimes. No one can blame cryptocurrencies for that.
However, looking at it from an objective level, security is one of the key reasons why a number of legislators refuse to give cryptocurrencies of any form domestic backing to operate as a legitimate currency in some jurisdictions.
Even in countries such as Montenegro which has no national currency. Those providers who operate in the cryptocurrency world are much more likely to become accepted by not only the legislators but also the general public if they presented a unified front to tackling money laundering at the source. (Politics and other issues aside).
Effectively, digital currencies offer something that, unlike the gold coin, mankind truly has never seen before. The ability to stomp out money laundering all together.
Through basic track and check status at the source, users can be monitored in their jurisdictions while the currency itself still maintains the freedom we all know and love. Yes, the freedom of cryptocurrencies and the lack of regulated involvement is a blessing.
However, we have seen in some cases where that freedom has been a curse, such as the stealing of coins and tokens from individuals and some guy in Greece helping drug cartels clean three billion in cash.
Regardless of what side of the regulation vs. freedom side of the fence you sit on one thing is clear. Cryptocurrencies pose amazing possibilities for the future and give us the ability to re-write the playbook on compliance and regulation to suit everyone, not just governments and financial institutions.
To best resolve this, people need to stop looking at the old solutions for new technologies.
- By Cal Evans
Cal Evans is an International Technology Lawyer from London who studied Financial Markets at Yale and has experience working with some of the best-known companies in Silicone Valley. In 2016 Cal left a top 10 California law firm to start Gresham International a legal service and compliance firm which now has offices in the U.S. and U.K. specializing in the technology sector.