Crypto Oct 04, 2020

Why Governments and Financial Institutions Distrust Crypto

A report has shown that governments and financial institutions distrust…

In the recent past, government agencies, financial institutions and cryptocurrency stakeholders have locked horns about the rise in crypto-facilitated international dark web crime.

The creation of Anti-Money Laundering / Know-Your-Customer (AML/KYC) policies was seen as a new leaf for a supposed-to-be-legitimate industry that has become the center of attention in the fight against international organized crime.

As it stands, cryptocurrency exchanges have been assertive about their genuine commitment to ward off criminal elements looking to use their platforms for money laundering and terrorist financing reasons.

On the other hand, governments and financial institutions believe otherwise – they seem to distrust cryptocurrencies along with their enablers.

This reality came to light in a September 29 report titled Cryptocurrency Risk & Compliance Survey, which was published by British firm RUSI and the Association of Certified Anti-Money Laundering Specialists (ACAMS) – which highlighted the very divergent attitudes towards cryptocurrencies by crypto, government, and banking actors.

The Findings

The study sought to analyze more than 550 responses from various organizations and entities, including banks, police departments, financial regulatory agencies, law firms and insurance companies – in addition to actors in the cryptocurrency industry.

The resultant report outlines a number of very interesting findings.

First, only 23 percent of government agencies believe in significance of virtual currencies as an opportunity, the crypto industry represented 80 percent of positive sentiment to that effect.

Second, about 89 percent of government organs expressed their reservations about crypto applications, linking digital currencies to illicit dark web activity. Only 50 percent of crypto-related respondents held the same view.

Similarly, financial institutions believed that cryptocurrencies occupied the center of money laundering operations across the world – which was in contrast to 57 percent of respondents in the crypto industry showing the same concern.

In terms of anti-cybercrime efforts, a paltry 9 percent of financial institutions trusted that crypto exchanges are truly willing to combat the vice, while 48 percent of crypto actors expressed their confidence in the commitment to tackle crypto-enabled cybercrime.

Further, in reflection of the openly-divergent views between financial institutions and crypto industry actors, the report found that only 20 percent of the financial institutions involved in the survey believed that crypto transactions were transparent, which conflicted with 83 percent of crypto specialists’ responses.

What Implications Should We Expect?

The above findings provide a glimpse into two possibilities, neither of which are actually positive in essence. Either the crypto industry is exceedingly lethargic to the anti-money laundering cause, or government agencies and banks lack full knowledge about how crypto assets work.

Indeed, the study clears doubt about the currently-existing distrust among government agencies and financial institutions – an aspect that directly translate into the widespread anti-crypto sentiment that we have witnessed over the years.

While several reasons can be drawn about why governments are afraid of crypto, the fact that cryptocurrencies continue to enable dark web crime has hampered legitimate efforts to exonerate digital asset stakeholders of all the blame.

Nonetheless, the discouraging figures that were published by the report do not mean that we should dismiss cryptocurrencies by giving up on their legitimate future. As noted by the report, participants to the study appeared to be in a state of “agree to disagree” as far as the subject was concerned.

It turns out that 56 percent of respondents in the survey confirmed that much of their decision-making is centered around the example set by other governments on matters cryptocurrency.

Thus, it can be concluded that best practices in the crypto sector were messed up from the very beginning. Moving forward, emergent trailblazers must strive to set appropriate standards to be followed in order to achieve initial goals of digital assets.

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