Industry and authorities divided on cryptocurrency risk

Divided opinion on the perceived risk of cryptocurrency - including the links between cryptocurrency and illicit activity - were among the key findings of a new global survey.

The Royal United Services Institute for Defence and Security Studies (RUSI) and the Association of Certified Anti-Money Laundering Specialists (ACAMS) commissioned YouGov to survey 566 professionals across the financial and cryptocurrency industries, including cryptocurrency exchanges, financial regulators and financial intelligence units.

It found that criminal activity remains top of mind for both governments and crypto industry professionals, with 70 per cent of total respondents highlighting this as a concern.

When asked to select any areas of concern, respondents overall indicated they are worried about the use of cryptocurrency for money laundering (84 per cent), on the dark web (84 per cent), for procurement of illicit goods (83 per cent) by sanctioned actors (82 per cent), by terrorist organisations (79 per cent), to fund human trafficking (76 per cent) and in fraudulent initial coin offerings (75 per cent).

However, the survey demonstrates a disconnect between governments and the industry on the nature of risks posed by cryptocurrency and ongoing concerns over the use of cryptocurrency for criminal activity. The cryptocurrency industry was notably less worried about each of the listed risks, considering only sanctions evasion as a high priority.

It also found respondents split over whether they consider cryptocurrency a risk or an opportunity – with significant gaps between government and financial industry perceptions and those directly involved in the crypto industry.

The cryptocurrency industry largely believes that cryptocurrency transactions offer more transparency than traditional financial transactions, and that transactions are compatible with sanctions screening and compliance, while financial institutions and government disagreed.

While cryptocurrency professionals are aware of the risks in their industry, other actors such as the media, politicians and the general public are less aware of the risks. Overall, there is a far higher likelihood (78 per cent) that institutions will seek guidance from non-governmental organisations such as trade bodies and blockchain associations, than from governments. Respondents were also of the view that governments are more likely to defer to international bodies (45 per cent) over their own regulatory systems (35 per cent).

Kayla Izenman, research analyst at RUSI’s Centre for Financial Crime and Security Studies and co-author of the survey, said: “The crypto industry appears to have a great amount of confidence in their own abilities to counter and detect risk, whereas government doesn’t have nearly as much faith.

“Bridging this gap is essential, as all sectors agree that the use of cryptocurrency is on the rise, but we know there’s no clear consensus on domestic regulatory action – this risks opening the door to illicit activities.”

Rick McDonell, executive director at ACAMS, former executive secretary of the Financial Action Task Force and co-author of the survey, added: “The results of this survey give a unique global insight into how respondents from governments, financial institutions and the crypto industry itself think about cryptocurrency - its potential and its risks.

“Their views are well worth noting as policy making and regulatory enforcement continue to take shape around the world.”

    Share Story:

Recent Stories

Meet Evelyn, your Economic Sanctions/PEP/Adverse Media Alert Adjudication Analyst
Meet Evelyn, an Economic Sanctions/PEP/Adverse Media Alert Adjudication Analyst, who uses native AI/ML capabilities to automate the Customer/PEP screening and Negative News screening alert adjudication processes for leading BFS organizations with greater speed, accuracy, and consistency than human analysts.

New Business Frontiers
FStech’s Mark Evans discusses the future of financial services with Liu Jianning of Huawei, covering the limitations that current thinking can impose, how financial institutions can embrace technology to be both agile and resilient, and making space for the organisation to focus on the job of creating innovative business models and on delivering business value for their customers.

The Future of Intelligent Finance
FStech Group Editor Mark Evans sits down with Jason Cao, President of Global Financial Services Business Unit, Enterprise BG at Huawei ahead of its Intelligent Finance Summit which was held on 3rd and 4th of June in Shanghai. This Q&A delves into key trends in digital transformation of the financial services industry as well as a look at how data, robotic infrastructure, intelligent storage and innovative technologies are shaping the future for FSIs.