CyptoCurrencies – Is Bitcoin A Vehicle For Terrorist Financing And Money Laundering? (2024)

November 27, 2017

By Sikander Hayat

It is fascinating to understand the creation of money out of thin air by the central banksand governments across the world. How a fiat currency gains credenceand what is it backed by is a very interesting subject. How piece ofpaper or some digits on computer screen can be called money and canbe exchanged for physical goods is fascinating to observe. Off coursevalue of such a currency is only valid as long as people trust it.

Is there a futurefor current paper currencies or these are going to be replaced bydigital ones. With the meteoric rise of Bitcoin and other cryptocurrencies, it is a matter of time before central banks will have tocome up with a mechanism to integrate these into fabric of currentcurrency universe and find a way to regulate them.

I assume that thecurrently cryptocurrencies derive their value from the use by money launderers and criminal element of our societies as it is possiblythe best way to make their black money white. Currencies likeBitcoin present a clear and present danger to the regulatory regimesaround the world and although nobody is quite sure where thesecurrencies derive their value from, they have seen a meteoric rise inthe last few months.

Currencies likeBitcoin must be regulated to make sure that we know who owns how muchof this stuff for variety of reasons. One of these reasons is to makesure that this does not turn out to be the ponzi scheme which it isincreasingly looking like where as long as someone out there is inthe market to buy it from you, the price will keep rising until themusic stops at which point the currency becomes worthless. If thathappens a lot of people will lose money and lives will be ruined.

Other importantreason is it is very hard to stop accumulation of criminal funds whenregulatory authorities have no idea of who owns the units in thesecrytocurrencies. This situation is similar to bearer shares whichhave now been banned in large parts of world exactly because of thereason that we do not know who owns them and what value is held byindividuals. Bearer shares have proved to be a good way of hiding money which has been acquired by either by criminal enterprise or byswindling funds from national budgets in countries whereaccountability is not very strong.

Panama papers andmore recently treasure island papers have been good examples of suchphenomena.

May be it is afutile exercise to try to control market forces as from siliconvalley to to the back alleys of Mumbai, people are miningcryptocurrencies. The forces which brought internet age are the sameforces which are going to transform the currency universe and the waywe make payments . Regulatory authorities and central banks will haveto live with the consequences of this new world where value / moneycan be anything as long as there is a mechanism to exchange one valuefor an other. These digital currencies do just that. The jury is outon the scale of disruption caused by cryptocurrencies but the impactcan already be seen.

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