From the time it appears, cryptocurrency has become an extremely effective tool for crimes and money laundering, the main reason is that the law on how to use cryptocurrency is still ineffective. We all know that it calls itself a “currency” but all countries which accept cryptocurrency just see it as digital assets that can be used to purchase goods and services, therefore, any laws related to banking or currency fields cannot be applied to cryptocurrency. So how can countries control the dangers of cryptocurrency if they are used for bad purposes? The answer is anti-money laundering and counter-terrorism financing (AML/CFT) laws
Why does cryptocurrency become an effective tool to commit crimes?
Cryptocurrency is a new technology that humanity or most of us have not yet been able to adapt to or understand how it operates and with the characteristics that those who develop them, calling it the future of money, cannot imagine how great the danger of cryptocurrency is if it is exploited.
Firstly, it is the Anonymity of cryptocurrency that becomes the biggest concern for legislators but also the perfect condition for criminals to launder money or hide profits from illegal activities. Every cryptocurrency transaction is conducted anonymously, making it difficult to trace the source of funds in the past and even at the present, with the emergence of a series of centralized exchanges, the account or name of users are required to be anonymous, which doesn’t solve anything.
The following reason is the Mobility of cryptocurrency, with the technology of blockchain, cryptocurrency can be transferred quickly and easily between accounts, up to thousands of transactions per second and through a lot of countries. Most illegal transactions are not conducted through centralized exchanges and without the acceptance of most banks in the world for cryptocurrency, making them more difficult to track. Although blockchain technology allows everyone to track transactions, with anonymity, it is impossible to know the true identity of criminals.
Last but not least is the Accessibility of cryptocurrency. Unlike using services from banks, which require age and financial conditions, cryptocurrency does not require anything except the internet. Cryptocurrency can be bought and sold online, making it easily accessible to individuals and organizations in every country and even sanctioned countries. For sanctioned countries, cryptocurrency has become an effective tool helping them trade with the world, and becomes a tool for financial fairness. However, if used to cover up illegal transactions, it will become a tool for crime, like crypto exchange Binance.
The crucial role of anti-money laundering and counter-terrorism financing (AML/CFT) laws
In an increasingly interconnected globalized world and the rise of cryptocurrency, the illicit flow of funds poses a significant threat to financial integrity, national security, and economic stability. The AML/CFT laws play a crucial role in combating these threats by deterring and preventing the laundering of illicit proceeds and the financing of terrorism. The anti-money laundering and counter-terrorism financing (AML/CFT) laws have missions in safeguarding the integrity of the cryptocurrency ecosystem. AML/CFT laws require cryptocurrency exchanges and other service providers to implement measures to identify and prevent the use of their platforms for illicit purposes.
The implementation of AML/CFT laws in the cryptocurrency space is not without its challenges. The decentralized nature of cryptocurrency can make it difficult to trace the source of funds. Additionally, the pseudonymous nature of cryptocurrency transactions can make it difficult to identify the true owners of funds. However, the challenges of implementing AML/CFT laws in the cryptocurrency space are not insurmountable. By working together, governments, regulators, and cryptocurrency businesses can develop and implement effective measures to combat money laundering and terrorist financing.