Cryptocurrency is gaining ground across the world and the initial fears of being on scary and unfamiliar territory are slowing dissipating. Cryptocurrencies have immense benefits- they cannot be counterfeited or reversed at random, settlements are immediate, attract lower transaction costs, and prevents identity theft and so on. However, there is a dark side to it as it can be used for illegal activities such as hacking and money laundering- to name a few.
Bitcoin and other cryptocurrencies such as Monero and Zcash are being freely used for illicit activities on the Internet. This has the United States Secretary of the Treasury- Steven Mnuchin- very worried. He voiced concern over these currencies being used for speculation and is concerned that consumers will get hurt. He deems it his top priority to ensure criminals cannot get their hands on these currencies.
Americans could turn to Bitcoin
Due to new foreign account regulations that demand Swiss banks to disclose information of American accounts, US citizens can no longer open offshore Swiss bank accounts. This could be the chance that Americans were waiting for to switch over to Bitcoin, which offers secrecy features like those offered by Swiss banks. Bitcoin wallets could become more popular because of the security it affords.
Mnuchin doesn’t want this to happen. At a meeting at the Economic Club of Washington, he likened the bitcoin to a ‘Swiss bank account’. He did agree that in the U.S., there were laws to regulate banks, regulation in other countries appeared to be more fluid. If Americans were to switch over to Bitcoins, international transactions could never be tracked and misuse would remain undetected.
The Secretary, expressing deep concern at such a possibility, offers US tracking facilities to G20 members to prevent bitcoin wallets from being used for illicit activities and also from becoming Swiss accounts.
In November 2017, Mnuchin noted that individual states in the US had regulations about how cryptocurrencies were being used and regretted the absence of a Federal directive. Because of low international transaction fees and its anonymity, bitcoins could be used to siphon funds abroad, illegally.
Cryptocurrency industry experts don’t seem to share Mnuchin’s concerns and are not enthusiastic about more regulations. Though they were in favor of regulations and noted that they did exist, the idea of ‘total control’ didn’t appeal to them. They believed that such regulations would not only stifle the idea of cryptocurrencies, but also lead to several other problems.
After all, when bitcoin founder Satoshi Nakamoto developed the cryptocurrency, he wanted to “circumvent the existing financial system”. At least a part of his philosophy was to ensure anonymity in transactions and ownership. ‘Total control’ would apparently negate the very concept for which bitcoins were made.
The collapse of the mortgage system collapse in 2008 is a sterling example of what happens under control and regulation.
Mnuchin concluded by noting that countries could also use digital currencies to circumvent existing financial sanctions.