Dennis Lawrence CFE, CAMS
Lawrence is a corporate investigations and anti-money laundering professional in Washington, D.C.
2017 was a year of unprecedented progress for cryptocurrencies. From the Japanese government’s decision to recognize Bitcoin as legal tender to the overall cryptocurrency market cap exceeding $500 billion, it is a safe bet to argue that this revolutionary digital asset class is here to stay. With cryptocurrencies quickly becoming both a speculative investment and payment method, certain names in the space are gaining credibility. Ripple is helping banks move money internationally at speeds and costs far superior to wire transfers. Ethereum is being used to build a decentralized commercial platform that will execute smart contracts. And Bitcoin is regarded as a store of value more precious than gold.
As a result of their increased popularity amongst millennials and East Asian markets, cryptocurrencies have now attracted Wall Street and a mainstream following. Perhaps expectedly, their use in illicit activity has transformed since the early days of the Silk Road, with bad actors being compelled to change their modus operandi and create new methods to unjustly enrich themselves. Regardless, the potential long-term benefits of cryptocurrency far outweigh the risks, and its future looks increasingly bright.
Once reveled as the easiest means to move dirty money, shadowy figures seeking high levels of anonymity are relying less on Bitcoin since transactions can be forensically traced on a blockchain. Instead, they are now turning toward privacy coins such as Monero which advertises its built-in money laundering protocols designed to “obfuscate the amounts, origins, and destinations of all transactions.” The criminal underworld has reason to be paranoid, as law enforcement has partnered with consulting firms to build databases of Bitcoin wallets used in Dark Web transactions tied to real world actors. Meanwhile, cryptocurrency exchanges in the U.S. and several major world markets are abiding by stricter levels of regulation focusing on AML/KYC compliance. Other major concerns such as Initial Coin Offerings (ICOs), which serve as fertile grounds for pump and dump schemes, are rightly receiving scrutiny from regulators worldwide seeking to protect novice investors from financial predators.
Despite its shortcomings, all signs point to the long-term survival of cryptocurrency albeit with significant regulation in free market democracies. With that said, of the more than 1,300 cryptocurrencies in existence today, it is likely that over 99% will disappear in the long run, perhaps bearing some similarity to the post dot-com bubble. The few prominent names that remain will become integrated into our daily lives, either as of direct use to individuals or corporations. The next technological wave to hit our society is upon us and it will pay to cautiously embrace the future.