The New Wild West: Preventing Money Laundering in the Bitcoin Network
http://works.bepress.com/kavid_singh/1/Abstract
Bitcoin is the most popular online decentralized currency in the world. Created by an enigmatic figure, Satoshi Nakamoto, in 2009, its propagation and use has caused heated controversy. On the legal side of its use, businesses both large and small have started to accept bitcoins as a form of payment. On the illegal side of its use, large quantities of bitcoins worth hundreds of millions of dollars have been stolen from businesses and large Bitcoin currency exchanges. The aim of this article is to introduce workable federal regulation that will help deter money laundering, a pervasive problem in the world of Bitcoin and other decentralized virtual currencies. The Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Department of the Treasury, is the only federal agency to have provided anti-money laundering regulations for virtual currencies. Thus, analysis of these regulations is an important focus of the paper. This article proceeds by (1) explaining what Bitcoin is, (2) critiquing FinCEN's anti-money laundering regulatory regime for its negative effects on Bitcoin, (3) revising FinCEN's regime to minimize these negative effects, and finally (4) testing this revised regime by applying it to several important Bitcoin institutions.
