Regulating virtual currencies –the
challenges of applying ﬁat
currency laws to digital
Mohammed Ahmad Naheem
Mayfair Compliance, London, UK
Purpose –The purpose of this paper is to considerthe recent (Dec`15) introduction of the Bitlicensing rules
in New York and consider from a banking perspective how this will impact on their own risk assessment
processes. The paper alsooutlines the challenges of applying ﬁnancial regulation to companiesthat have an
area of expertise and business that is more aligned to software development, rather than ﬁnancial service
Design/methodology/approach –This paper is a viewpoint paper,which offers a critical discussion on
the FATF guidelines on virtual currencies. The paper comparesdevelopments that are currently occurring
within the virtual currency sector in particularly the new Bitlicensing process in New York State and
discusses the implications to the banking sector on risk assessment processes for virtual currency
Findings –This paper will beneﬁt the bankingand regulation industries as well as economic and banking
academicsand anyone with an interest in virtual and digital currency technology.
Originality/value –This paper is unique in that it examines the issue of virtual currency regulation
from a banking perspective. It explains the virtual currency technology as a means to be enhancing
banking risk assessment, for clients seeking to incorporate virtual currency transactions into their
business. This paper impacts on the banking and regulatory sectors because it critically examines the
current practice of over regulation and the impact that this has on alternative ﬁnancial systems, such as
digital and virtual currencies. The paper offers a theoretical framework as w ell as citing current practical
reports of how regulation has already started to affect the ﬁnancial services landscape. The impact of
getting this wrong can le ad to increased criminal activity, and thi s paper highlights how susceptible the
ﬁnancial sector is to this.
Keywords AML, Anti-money laundering, Virtual currency, Risk-based assessment,
Beneﬁcial ownership, Bitlicensing, Digital currency
Paper type Viewpoint
Please note that this paper was composed and submitted for review to this journal in December 2015.
All the content was current at that point in time (Dec 2015). The crypto currency industry and
governmental policies alongside the banking and regulation industries have evolved greatly since
then, with new material from academic research also emerging. These points need to be taken into
consideration when reading this paper. The author is a specialist researcher and practitioner in the
ﬁelds of Trade-Based Money Laundering and Crypto Currencies contracted to Mayfair Compliance.
(www.mayfaircompliance.com). The author acknowledges being the recipient of a research grant
awarded by Princess Ālae as part of Seven Foundation’s“2020 Banking Vision –building banks of
the future”and he thanks her for the continued support and motivation both to himself and other
students who beneﬁt through her generosity.
Journalof Financial Crime
Vol.25 No. 2, 2018
© Emerald Publishing Limited
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