Regulating virtual currencies – the challenges of applying fiat currency laws to digital technology services

Author:Mohammed Ahmad Naheem
Position:Mayfair Compliance, London, UK
Pages:562-575
SUMMARY

Purpose The purpose of this paper is to consider the 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 also outlines the challenges of applying financial regulation to companies that have an area of expertise and business that is more aligned to software... (see full summary)

 
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Regulating virtual currencies the
challenges of applying at
currency laws to digital
technology services
Mohammed Ahmad Naheem
Mayfair Compliance, London, UK
Abstract
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 nancial regulation to companiesthat have an
area of expertise and business that is more aligned to software development, rather than nancial service
provision.
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
transactions.
Findings This paper will benet 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 nancial 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 nancial services landscape. The impact of
getting this wrong can le ad to increased criminal activity, and thi s paper highlights how susceptible the
nancial sector is to this.
Keywords AML, Anti-money laundering, Virtual currency, Risk-based assessment,
Benecial 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
elds 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 Foundations2020 Banking Vision building banks of
the futureand he thanks her for the continued support and motivation both to himself and other
students who benet through her generosity.
JFC
25,2
562
Journalof Financial Crime
Vol.25 No. 2, 2018
pp. 562-575
© Emerald Publishing Limited
1359-0790
DOI 10.1108/JFC-08-2016-0055
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/1359-0790.htm

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