Bitcoin has long been criticized because of the discovery of dodgy activities following the Silk Road debacle, the collapse of Bitcoin Exchanges (Mt Gox), and the disappearance of Bitcoin in the Bitfinex hack.
As any new technology emerges, especially one that is anonymous, it is quite normal for it to come under constant attack and attract some unscrupulous actors.
Bitcoin has been around for 8 years now and is proven to be a reliable alternative to fiat currencies. It is the most successful of the 800+ cryptocurrencies that exist today, a number that by 2020 could be well over 5,000. An Altcoin is born with every download if used with the open source Bitcoin code, as entrepreneurs fork the software to shape a new Blockchain solution.
But overwhelmingly it is the anonymity still worries people and, along with a new complex language, is one factor potentially holding back Bitcoin adoption. It is not until you start owning and using Bitcoin that you realise its enormous potential, and, yes, its limitations.
It is quite clear the traditional banks are also failing to work together to eliminate fraudulent activity and tackle money laundering. Some banks systems are completely inadequate, while other banks knowingly deal with transactions that have a troublesome path. I think back to the HSBC situation in 2012 when they were fined $1.9billion for their misdemeanors.
Compliance continues to stifle business
The industry has knee jerked again and again, and compliance now accounts for as much as 20% of total operating costs. Each bank has armies of back office people checking, re-checking, and moving paper around. The world of AML and KYC is often nothing more than a theatrical display for legal and regulatory purposes rather than supporting the end customer, as they try to identity each end of the trade, and identify basic information to authorise the transaction. This is a situation brought about by an archaic System of Record reliant on antiquated SQL legacy databases where each party and layer in a market holds information that nobody trusts. Albeit, this is information that is often duplicated, incomplete, inaccurate, and stored in completely different formats, taking hours to dig up, filter and agree a single version of the truth. The banking community lacks a form of reference data that would facilitate the exchange and sharing of information, making it far easier to flag and sort the good actors from the bad.
Banks are fierce competitors and simply refuse to work together to solve industry issues and make sure criminal activity doesn’t infect the banking system. But they cant bring themselves to do this, or maybe they just don’t want to reveal what a shambles their data and record keeping is in. Or do they really know who they are dealing with (good and bad) and it is good business?
Fortunately for us, the new world of cryptocurrencies, supported by a libertarian attitude and sharing economy culture that is Blockchain, is working together to identify and eliminate the bad actors. And they are putting their Bitcoin house in order.
'The Bitcoin community is looking to remove money launderers and fraudsters from the financial system' mentions Grant Blaisdell Co Founder at Coinfirm.io
A number of new Blockchain businesses Coinfirm.io, Elliptic, and Chainlysis have emerged to meet the challenges of compliance head on, providing solutions that identify uses and activity at Bitcoin addresses, automated AML/KYC activities, and offer a collaborative approach.
Coinfirm.io takes this concept much further, building a database of activities where the Mining community, Wallet providers, and crypto Exchanges are helping, providing data that can be linked to social media and other data sources that highlights the Bitcoin or crypto address potential involvement trafficking, drugs, money laundering, and/or other criminal activity. www.coinfirm.io
The Bitcoin community is determined to rid the cryptocurrency world of fraudsters and money launderers, and although it is early days, the prospects look very good and their solutions actually work.
It seems banks will never play nicely together and do the right things for the customer and work together to solve the industry challenges. This is why they will be surpassed by a new financial systems of certainty, of trust. where the community is incentivized to look after its own and make sure all transactions are treated exactly the same.
I have been a fan of Bitcoin for a while now and I will continue to use it where I can as adoption increases and the underlying technology matures.
Now go buy some Bitcoin.
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