Trading in Legal Gray Area, CNN Takes Aim at Bitcoin’s Money Laundering Potential
The days of money laundering are not coming to an end, despite news reports of increasing numbers of fines against institutions found guilty of such charges. But, the mainstream media will do what it can to keep non-dominant financial instruments in the limelight of talk regarding money laundering. As CNN writes this week, “Bitcoin, a virtual online ‘currency,’ seems to be gaining traction and legitimacy among those who need to transfer or launder their cash outside of the prying eyes of regulators.”
The online marketplace for Bitcoin is referred to as “sketchy” by CNN, using an age-old technique of identifying anything outside the purview of normal transactions as “black market” or somehow shady. CNN shrinks Bitcoins userbase down to Iranians, hit men and drug dealers, “who prefer to be paid in an untraceable currency.” Damn, the Bitcoin user is in extremely dismal company on that list. Might as well expect sanctions or incarceration anytime now.
With Bitcoin stabilizing its value on international markets, it is quickly becoming a legitimate instrument in the dominant financial world, thus, according to CNN, “threatening major profit centers for both the banks and payment operators like Visa and MasterCard.
The CNN article serves two purposes: the de-legitimization of Bitcoin and the highlighting of fines “almost hard to comprehend.” Of course, while HSBC owes $2 billion and Standard Chartered $327 million, considering such banks’ overall balance sheets, these fines are only breathtaking to the destitute masses. Having been accused of helping illegal transfers and business in violation of international law and UN sanctions, the two banks – who have helped Mexican mafia and Tehran, respectively – have aided illegal transactions to the tune of hundreds of billions of dollars. It is not just these two banks that are involved in dominant financial system fraud, for the fraud is endemic to the system. In order to exist as a multinational player, a bank must blend in and commit fraud. As CNN reports, and everyone knows, “nearly every major financial institution from Credit Suisse (CS) to UBS (UBS) to JP Morgan (JPM) have been fined for facilitating illegal transactions for governments or individuals. Doing illegal business pays.
The banks are finding it more difficult to deal with rogue nation-states, terrorists and drug cartels in the age of Know Your Customer in the post-9/11 world. The Obama administration has pressured the EU to lock Iran out of its banking system, for example, and Iran was also recently cut out of the international “SWIFT” club, making it near impossible to transfer money to Iran from out the country.
CNN does not just feel criminals will use the Bitcoin network to launder money, but also nation states. The Pentagon run media center admits that “passing money and making transactions outside of normal pay channels has serious repercussions for the financial industry.” CNN understands the advantages – at least vaguely – of Bitcoin, such as the network is free and can be used by anyone to send/receive payment 24/7. CNN wants to ensure that people do not see the good in Bitcoin, thus keeping them within the dominant financial system paradigm:
But just because the Bitcoin network is free to use doesn’t mean it’s the best way to move wealth. Indeed, it is by far the riskiest way to send money as it is only as good as its medium of exchange — Bitcoins. Unlike currency backed by the full faith and credit of sovereign nations, Bitcoins are backed up by, well, nothing, leaving it open to wild swings on the international currency market. Since Bitcoins are still a virtual currency, buyers and sellers take on massive exchange rate risk moving money to and from their Bitcoin accounts. In the two years it’s been around, the Bitcoin has been valued as high as $30 to as low as $2. A wild swing occurred last summer when security concerns cause people to dump their Bitcoin en masse. Casual observers wrote off Bitcoin and moved on, but it has slowly and steadily regained its value, last trading at around $14 per Bitcoin.
“Authorities” in the US and Europe do not want Bitcoin to grow in value and become a major instrument. The FBI indeed has reported that all Bitcoin exchanges be forced to adhere to the same anti-money laundering as the dominant financial system.
For now, Bitcoins are operating in a legal gray area, which cannot last long. For now, Bitcoin transactions take place unregulated and undetected in many cases.
Bitcoin does pose a threat to Visa, Mastercard and PayPal. While holding value for long periods of times in Bitcoin can still carry risks, the transaction ease makes them a more attractive medium than any dominant financial system options. Trends, to be sure, in Europe of the currency becoming regulated does not highlight what makes Bitcoin so unique. Instead, it brings it under the stuffy regulation of all other money options.