Our last blog post introduced cryptocurrency and how U.S. anti-money laundering (AML) regulations were being applied to digital cash in an effort to control its illegal use.  But the problem extends far beyond our borders.

Earlier this month, China’s largest e-commerce group, Alibaba, banned the use and sale of Bitcoins on its site.  While Bitcoins were not accepted as a form of payment by the marketplace itself, several Chinese merchants operating within the site accepted Bitcoins as part of sales transactions.  But no longer.

Despite the rising popularity of Bitcoins in China, country officials decided that the population did not sufficiently understand how Bitcoins work, and that the acceptance of digital currency opened the door for international fraud.  Spurred on by the same fears as American banking regulators, the People’s Bank of China and four other ministries now restrict institutions like Alibaba from using Bitcoins, primarily to protect the status of the country’s currency (renminbi) and to restrict opportunities for money laundering.

Last summer in Europe, the interest in Bitcoins rose dramatically as the financial crisis intensified in Cyprus.  For Europeans and particularly Cypriots, decentralized digital currency seemed an attractive alternative to just removing money from shaky Euro banks.

In December 2013, the Bank of France joined the growing number of international banking institutions voicing concerns about the increasing use of cryptocurrency.  It conceded that the anonymity Bitcoin offers its users raises the risk of money laundering and the financing of terrorist activities.

It will be interesting to see what happens next.  According to J. J. Zhang at Marketwatch, “…with constant news of more Bitcoin regulation and bans, the 2014 outlook for the ambitious digital currency is decidedly less rosy.”

by Richard Paxton

(Want to learn more?  Alacer’s AML experts will be attending the 19th Annual AML & Financial Crimes Conference, being held March 16-19 at the Westin Diplomat in Hollywood, FL.  Send an email to me at Richard@alacergroup.com to arrange a chat.)