Individuals and criminals planning to use bitcoin for money laundering better watch out for U.S. Treasury Secretary Steven Mnuchin.
During an interview at the Economic Club of Washington, Mnuchin said that he was working with representatives from G-20 countries to make sure that “bad people cannot use these currencies to do bad things.” In practical terms, this means preventing the cryptocurrency from becoming a mechanism to store or transfer funds illegally.
In his interview, Mnuchin likened bitcoin to a “Swiss bank account.” While U.S. laws require banks to know their customers, regulation in other countries is more fluid. Switzerland, long famous for its tight-lipped bankers, is the most prominent such example.
According to Mnuchin, bitcoin trading firms have an obligation to track bitcoin transactions. “We can track those activities. The rest of the world doesn’t have that, so one of the things we will be working very closely with the G-20 is making sure that this doesn’t become the Swiss bank account,” he said.
A History Of Criminal Uses
Since its launch 10 years ago, bitcoin has been used by some criminals for purposes as varied as money laundering to running drug cartels on the dark web. (See also: Bitcoin Price Drops After 'WannaCry' Ransom Taint.)
The cryptocurrency’s meteoric rise has also invited government scrutiny and comparisons to the dot com mania at the turn of this century. Governments around the world have responded by banning initial coin offerings and considering strict regulation to bring cryptocurrencies within the ambit of the global financial system.
Why Mnuchin May Face Resistance
This is not the first time that Mnuchin has expressed concern about uses for bitcoin. In November 2017, he said he wanted to make sure that bitcoins were not used for illicit purposes and that the U.S. government had formed working groups to monitor cryptocurrencies. Individual states already have regulations concerning bitcoin, but a federal directive is missing for cryptocurrencies. (See also: Steven Mnuchin: U.S. Government Is Monitoring Bitcoin.)
However, Mnuchin’s vision of bitcoin may be at odds with that of its enthusiasts. According to lore, bitcoin founder Satoshi Nakamoto developed the cryptocurrency in order to circumvent the existing financial system. Anonymity, in transactions and ownership, was a critical part of his philosophy. In addition to bitcoin, other digital currencies like Monero enforce privacy in an even more strict manner. (See also: Monero: For Black Markets, Where Bitcoin Isn't Enough.)
But Mnuchin’s remarks are in line with industry developments. There are other cryptocurrencies which hew to Mnuchin’s criteria for international transfers. For example, Ripple is working with banking systems to reduce transfer costs and become a global liquidity provider. Then there is the fact that Switzerland is reinventing itself to become a haven for cryptocurrencies.
Investing in cryptocurrencies and other Initial Coin Offerings ("ICOs") is highly risky and speculative, and this article is not a recommendation by Investopedia or the writer to invest in cryptocurrencies or other ICOs. Since each individual's situation is unique, a qualified professional should always be consulted before making any financial decisions. Investopedia makes no representations or warranties as to the accuracy or timeliness of the information contained herein. As of the date this article was written, the author owns small amounts of bitcoin. It is unclear whether he owns other bitcoin forks.