USD $2,000,000,000,000 (2 trillion) are laundered every year through fiat currency and only a fraction (0.125%) of this amount, has been allegedly laundered through bitcoin in past 10 years. It is astonishing how bitcoin has been associated to launder money despite its close-to-zero figure.
UBS, one of Swiss banking giant was slapped by a $5.1 billion in French tax trial. A Paris court charged the bank for facilitating and helping its wealthy French clients to launder and hide billions of euros to evade tax. The court ruling follows an investigation, lasting almost 8 years. Initially, the bank was fined 3.7 billion euros by the judges but additional 800 million euros were added to compensate the French government for the damages caused by UBS.
Money laundering deals in hiding illegal acquired money, through a complex process of transactions, to make it hard for anyone to track the trail. It is very surprising how a decentralized currency, with transparent immutable public ledger (blockchain), that can easily be tracked is associated with money laundering and why laundering fiat currency, that has a facade of tedious checks, make it really hard for authorities in tracking the money trail to catch wrongdoers.
Last month the bank announced that it made net profits of $4.9 billion in 2018. It is immensely important to mention here and not many analysts have pointed out that UBS’s fine is equivalent to the bank’s net profit of last year (2018). For financial institutions, a fine that equals the actual profit after including all operational expenses of previous year is a crime of the highest order.
Considered as the largest criminal fine in the history of France, the recent fine is not new to UBS since the bank was fined 300 euros million in 2014 for a similar case in Germany. The bank was also charged $780 million in 2009 in U.S for the same reason whereas in 2012, it was charged $1.5 billion for manipulating global benchmark interest rates.
Banks and Money Laundering Love Affair
Banks love affair with money laundering is something that is going on ever since the creation of banks. If we talk about recent times, in 2010 Wachovia (later merged with Wells Fargo) laundered $390 billion from U.S. to Mexico, by drug cartels.
In 2012, Standard Charted came in to limelight and was charged to help the Iranian government to launder around $265 billion. The bank got away after paying merely $350 million in 2012 and later charged again with additional $350 million in 2014, for not complying with anti money laundering rules.
Bitcoin Transactions are Easy to Track
Bitcoin make it extremely easy for the authorities to track money launderers as compared to fiat currency for cross-border transactions. When a user creates a bitcoin wallet to receive coins, the user is assigned a complex public wallet address with a string of letters and numbers. Now if anyone wants to send or receive bitcoin from a person, that wallet address is required and anyone can see the amount of bitcoins a person holds, through the wallet address.
For understanding of bitcoin transaction, from the above example, David sends 5 bitcoins to Sandra and a message is sent across bitcoin network to validate the transaction. Nodes (a program that fully validates transactions on the network) validates the transaction and updates the public ledger that is visible to everyone. Making it extremely easy for anyone to track any bitcoin transaction. Anti-bitcoin narrative was formed since bitcoin questions the existence of financial institutions, which can be reflected from the previous statements of leaders of the finance industry and where the same institutions stands now.
In 2017, JP Morgan chief Jamie Dimon, made a few statements against bitcoin and said;
Bitcoin is a fraud that will blow up. It is worse than tulip bulbs
Now the same institutions are moving closer to it by adopting the core technology behind bitcoin i.e blockchain. JP Morgan has launched its own blockchain-based coin by the name of JPM coin. Even though the coin is backed by the U.S dollar, meaning each JPM Coin is equal to $1 and can be redeemed, many cryptocurrency experts are considering it one step closer towards bitcoin acceptance.
A bitcoin enthusiast and co-founder of Morgan Creek digital, Anthony Pompliano (Pomp), related the current situation to the days when USD was backed and could be redeemed for gold. He tweeted
From 1834 to 1971, someone could redeem gold for their dollar bills.
Today J.P. Morgan claims you can redeem $1 for every JPM Coin.
Eventually the bank will get greedy and not allow redemptions too.
Just a matter of time.
— Pomp ? (@APompliano) February 17, 2019
‘Bitcoin is a tool for terrorists and money launderers’ is the statement we hear from high-profile finance personalities and government officials because bitcoin provides an alternative to the the current financial system, that is more efficient, cheaper, transparent and secure. This is the reason banks and other centralized financial institutions despise it. It is a decentralized technology and the beauty of a decentralized system is that it is neither dependent, need permission from anyone nor can it be controlled by a centralized authority. Authorities should listen what Pomp says;
Long bitcoin, short the bankers!