Bitcoin and Money Laundering?

Bitcoin and Money Laundering

Even though there are tonnes are advantages of using Bitcoins and the blockchain technology behind the concept of cryptocurrency since they are not controlled by any financial institution or government of any nation, there is still a little bit risk that Bitcoins could be utilized for money laundering. The reason why we are saying this is because you cannot link Bitcoins to any person’s identity and they only depend on the private key that is connected to the Bitcoin account. Also, the whole concept of cryptocurrencies run on a decentralized network, there is no such thing as central record-keeping which any nation’s government or financial institution can provide.

The mechanism for money laundering

Moving vast amounts of money from one place to another has conventionally been a difficult task as it involves trusting mediators to complete the transfer. Swiss Banking System is precisely known for the very same reasons. Switzerland has a custom of secret banking that goes back to the Middle Ages. In fact, this secret backing was codified in the Banking Law of 1934 which of course, made the country an official hub to hide millions and billions of dollars to evade taxes.

However, this all changed when the Federal Bureau of Investigation (FBI) evade a multi-billion tax case back in 2008 and which also involved the Swiss bank UBS. This resulted in much stronger and effective strict laws against money laundering for the Swiss banking domain as well as more power to regulators.

The requirement for stringent laws

Bitcoins and other cryptocurrencies are decentralized which mean that there will be no central authority which keeps an eye on all the legal and illegal transactions that are taking place on its ledger. And this makes it even more difficult for regulators to handle and monitor scenarios like these. Especially to control Bitcoins, an adversarial government should take steps to close the public Wi-Fi as all the cryptocurrencies, including Bitcoin don’t depend on central servers to work. Instead, they rely on their decentralized network of miners to complete their transactions.

Ever since Bitcoin was launched, there were too many illegal, and fraud things happened because of its decentralized ledger system. However, no nation’s government or any other financial institution has ever taken any step to regulate Bitcoin so efficiently so that they can put a period to such illegal activities.

Prevention and mitigation

Ever since Bitcoin became popular 6-7 years ago, the regulators across the globe have made a variable number of attempts to regulate Bitcoins. Nevertheless, most of these regulators didn’t quite get the idea of Bitcoins and how to control them. Currently, techniques such as Chain analysis have to become more advanced until then we have to wait and watch the financial institutions for when people make Bitcoins to fiat conversions. Because once a person conversions from Bitcoin to fiat, financial institutions and the government can monitor the whole history of how Bitcoins have been spent or purchased. And in any case, the government finds that the Bitcoins have been used for any illegal activities such as money laundering, they have the authorities follow up with the person whoever is holding that bank account.


Since its launch back in 2009, Bitcoin’s only aim was to become digital cash which people can use it in the place of fiat currency. Do you think money laundering started after Bitcoin launch? Of course not. People just used hard cash. But we, as people of the nation, need hard cash for everyday payments, any country cannot merely ban some money. Likewise, even though there is a minute part of transactions that may be utilized for illegal activities, we cannot say that we should ban Bitcoin or any other cryptocurrency for that matter. Instead of banning, we should improve our banking system and try to bring more transparency into the banking functions such as utilizing public ledgers to show every citizen of the country that the taxpayers’ money is being rightly used.

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