Money laundering risk bitcoin stock
However, the supply of every currency is controlled by some function, and in the case of the Bitcoin it is through the process known as "mining. While the sheer difficulty of mining assures Bitcoin users that there won't ever be a massive supply shock in the digital market, the way that Bitcoins are created causes one enormous problem.
Primarily, it incentivizes miners to hoard the currency upon receiving it. The only way to alleviate this issue is to mandate that miners have to exchange all newly-mined Bitcoins for another currency of their choice. Otherwise, volatility will end up killing this currency's potential, and a group of Bitcoin miners will control the supply. Is that really any better than a central bank? While one could make the case for an investment in currencies due to their diversification benefits , a purchase of Bitcoin would be pure speculation, akin to penny stocks.
But as a concept, I love it! A global currency would eliminate the need for exchanges making global commerce easier by increasing efficiency, reducing transaction costs, and ultimately reducing costs for the end consumer. Even better, Bitcoin is not controlled by a central bank, thereby reducing the risk of manipulation from authoritarian governments. And with a limited supply, inflation should be kept at a minimum.
It's truly a global unregulated currency that is not taxed at any level. Multiple attempts have been made to harness in virtual currency, but much like the government attempts to regulate the Internet, the regulations so far have failed. At some point, Bitcoins will likely need to be regulated to have lasting power.
The questions will be who and how. FinCEN has issued guidance concerting virtual currencies and their administrators and exchanges that subject these companies to the same regulatory responsibilities as other financial institutions. States are also involved.
At a time when we're seeing just how much power is abused I think the world is ready for a currency that is decentralized and controlled by the people. But yes, Bitcoin still has a journey ahead of it. It needs greater adoption, and more simplicity to appeal to the general public. But then again, the general public should be more informed anyway. Monetary decisions affect them more than the people that make the decisions.
Because the Bitcoin supply doesn't increase in proportion to the growth or use of Bitcoins, there is a deflationary effect, creating an incentive for people to hoard Bitcoins rather than spend them.
Gresham's Law in economics suggests that for a complementary currency to be successful, it needs to have an inflationary effect that exceeds inflation in the national currency. Until it gains widespread acceptance and price stability, it will never be a mainstream method of payment. And from an investing perspective, Bitcoin's uncertain future and the lack of any meaningful fundamental metrics make it a speculation at best, and gambling at worst. It's nearly impossible to move USD in and out of the largest trading platform MtGox and, as a result, there are very few significant market makers participating in the exchange.
Absent reliable providers of a liquid marketplace, volatility will remain high. This presents major difficulties for businesses and individuals that might otherwise accept Bitcoin as payment for goods and service in forecasting Bitcoin exchange rate risk. Bitcoin can't be a viable long-term currency unless, and until, it is more broadly accepted as an exchange medium for items of real value i. These challenges are interconnected and the current regulatory assault is the single most important aggravating factor to these circumstances.
But one thing we can all agree on is, while it's much safer and cheaper! On the dark side of it, Bitcoins can be used to hide large transactions from governments which really opens the door to black market activities. This, allied to the fact that sophisticated criminal networks are adept at exploiting any loopholes in regulations, means that the risk of cryptocurrency-related reputational fallout is very real. For risk and compliance professionals navigating ever-increasing regulations governing KYC and AML , inadvertently doing business with money launderers is nothing short of akin to disaster.
This growing risk simply adds to the juggling act already facing many compliance departments — one in which they must manage ongoing regulatory change, reduce costs and effectively do more with less.
Developments in the regulatory technology — RegTech — space, however, are rising to the challenge. The aim of RegTech is to harness the power of technology to improve the efficacy and efficiency of workflows in compliance departments, reducing the time and cost associated with remaining compliant.
Cost reduction is sorely needed: The Thomson Reuters Cost of Compliance report reveals that approximately half of respondents continue to expect bigger compliance budgets in RegTech solutions provide the tools needed to help establish and verify customer and counterparty identity with greater speed and efficiency, although this is a continuing challenge in the world of crypto transactions.
Part of the solution could be offered by centralized utilities that enable sensitive customer identification information to be uploaded, verified and maintained in a secure online portal. Such repositories are an additional resource for regulators as they continue their efforts to close in on money launderers and their activities.
One thing is certain: Cryptocurrencies are here to stay and compliance professionals should take urgent steps to understand the new risks they introduce, so that they can equip their teams to better navigate an ever-changing risk landscape.
End-to-end client identity, verification, screening and monitoring. Detailed integrity and advanced background checks on any entity or individual. Sam Chadwick 12 Mar How to fix common frustrations with risk Tackling financial crime through big data Risk technology: How sanctions-proof is your Source of Wealth due diligence?