Central Bank Digital Currencies and U.S. Anti-Money Laundering Laws
Is CBDC threatening or empowering the U.S.’s anti-money laundering laws?
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Introduction
Money laundering is the active concealment of the source of money. Persons typically engage in money laundering for two reasons: to evade taxation and to fund or hide illegal activities such as terrorism, arms-dealing, drug-dealing, and human trafficking.[1] The emergence of cryptocurrencies has facilitated the ability of individuals to launder money. Cryptocurrencies can be exchanged without any interaction with or through a traditional currency or bank.
Nevertheless, most digital wallets, money transmitters, and cryptocurrencies exchanges interacting with fiat currencies currently comply with AML standards.[2] For example, the Financial Conduct Authority in the U.K. regulates AML regulations for the crypto industry.[3] Nevertheless, many crypto-to-crypto currency exchanges elude AML jurisdiction or remain non-compliant with AML laws; these exchanges pose a significant threat to AML authorities by making exchanges of currency untraceable.[4]
