Virtual currencies: Out of the deep web, into the light

March 2014

Overview

Bitcoin and other virtual currencies have reached the point of broad influence, with the potential to tip over into full mainstream acceptance. But the potential for money laundering, large-scale theft, terrorist financing, and other illicit uses has regulators concerned. Financial services firms can play a critical role in the integration of virtual currencies through the implementation of anti-money laundering procedures and controls, including transaction monitoring and know-your-customer protocols.

View: Virtual currencies: Out of the deep web, into the light

Like many underground, countercultural phenomena that find themselves awash in cash, Bitcoin and other virtual currencies have reached the point of broad influence, with the potential to tip over into full mainstream acceptance. But the absence of a central controlling authority to balance the capacity for near-instantaneous and virtually anonymous funds transfer makes virtual currencies a source of significant risk for the financial services community. The threat of money laundering, large-scale theft, terrorist financing, and other illicit uses has regulators concerned, though policy-makers in the US also see in Bitcoin and its peers the possibility of a more efficient and secure payment system.

Financial services firms have so far kept their distance, but they stand to play a critical role in the integration of virtual currencies through the application of anti-money laundering procedures and controls, including transaction monitoring and know-your-customer protocols. If regulators and financial institutions can work together to implement rigorous yet forward-thinking guidance, they will enhance virtual currencies’ security and transparency while preserving their appeal: speed, ease of use, cost-effectiveness, and—above all—the promise of innovation.

Contact us

John Sabatini
Advanced Risk & Compliance Analytics Leader
Tel: +1 (646) 471 0335
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David Choi
Advanced Risk & Compliance Analytics Services Principal
Tel: +44 (0) (207) 212 1809
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Vikas Agarwal
Advanced Risk & Compliance Analytics Services Managing Director
Tel: +1 (646) 471 7958
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