Is the Government Trying to Kill Digital Currency?

 

Rob Blackwell, American Banker

The regulatory crackdown on Liberty Reserve is stoking fears that banks may soon begin severing relationships with digital currency providers and exchanges, effectively stifling their growth due to institutions’ fears of potential prosecution.

Government officials targeted Liberty Reserve in part because it allowed users to anonymously exchange funds, a key aspect of many digital currency systems, including Bitcoin, the most popular virtual currency. That has led to widespread concerns that other systems, and the banks that assist them, might soon be in government’s sights.

“There is fear from the government, and they are doing a lot to get in front of this,” says John Byrne, executive vice president of the Association of Certified Anti-Money Laundering Specialists. “Any time a movement of value is outside of systems that are regulated, there is concern.”

Government officials insist they are not trying to curtail the growth of digital currency. Jennifer Shasky Calvery, the head of the Financial Crimes Enforcement Network, says that Liberty Reserve was actively trying to assist money launderers and other criminals. Legitimate actors, she says, have no reason to fear the government.

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