Without any doubt, we can see that the world will adopt the concept of digital currencies sooner than we think. It doesn’t matter which ones will be pointed out as the main ones, it looks like pretty much every country in the world will have its own. But, to be completely honest, this is not that important of a question. The most important thing to know is that cryptos will prevail over the traditional world of finances.
There is absolutely nothing that can put a stop to that, it would need to be some kind of miracle. Before it became a pretty hot topic, many financial institutions pointed out some of the things that could be damaging to the economy, and who have direct ties with cryptos. Money laundering was one of these things. But it should be said there is a lot of money laundering in the traditional order of things.
Even though this is a pretty popular concept nowadays, we can see that there are many different misconceptions about it. Many people don’t know what they should choose between cryptos and fiat currencies. If you would like to learn more about it, please take a look at cryptwerk.com. We can say that there are things in which digital currencies are much better when it comes to preventing these kinds of illegal activities.
Some of these things can be much more efficient than traditional methods that are present since the beginning of modern banking in the 19th century. The system used for the concept of cryptocurrencies, blockchain can be used for the ultimate control over the financial transactions in the world. You ask how? Well, now we are going to focus on how digital currencies and their features can help with the prevention of illegal financial activities in the future. Without further ado, let’s begin.
Cryptos and Money Laundering
We can say that official financial institutions weren’t too happy to witness a new concept that has arisen in the last decade. It was often labeled as a concept where illegal activities are more likely to occur. There was something like this in the beginning.
However, since it became, almost, mainstream, we can see that the percentage of illicit transactions is now down to a bare minimum. Even though it’s pretty hard, almost impossible, to calculate how much of these are used with this aim, some reports say they make less than a percentage of the total number of transactions.
How Cryptos Can Prevent it?
We’ve mentioned that it is possible to use cryptos to have better control over the finances. There are a couple of ways it can be done. So, let’s take a look at it.
Since we know that cryptos are built on blockchain, which is a decentralized network, many people make the mistake when thinking about any kind of control as impossible. However, we can see that it is, in fact, possible. If you know that each of the owners needs to give approval for the transaction to succeed, you can see that some technologies can be implemented into it, for better control.
It’s pretty hard to do that, as you can imagine. But that doesn’t mean that this is impossible. Theoretically, there can be some kind of supercomputer that can provide the necessary control over the system. Since there is a node that is made whenever the transaction is made, there is a mark that can be followed and tracked. So, we can see that there is a possibility of how to do it properly. Immutable ledgers can be a way of tracking all the transactions.
We all know that absolute anonymity is one of the most important traits of cryptocurrencies. However, with the potential introduction of immutable ledgers, this is a barrier that people can overcome in the future, without a doubt. Since the possibility of tracking the transaction is possible, there is absolutely no reason why the identity of the parties cannot be found. As you know, there is something like this in the traditional world of finances. So, the concept is familiar.
At the same time, it is widely believed that the concept of an immutable ledger cannot be changed by anyone. So, there is absolutely no doubt that the connection between the transaction and parties involved in it can be established. More importantly, this is something that could be considered as definite proof in court. We can see that there is a potential for something like this in the future, without a doubt.
AML Transaction Monitoring and Blockchain
As we established earlier in the article, we know that detecting the potential connection between parties and transactions is pretty hard. However, in case we get some kind of Blockchain-based AML solution, we can see that the option for smart contracts can arise practically from nothing. It would include algorithms that could be automated to the degree that there wouldn’t be any need for anyone to oversee it, but this is simply too far in the future, we believe.
There would be an inbuilt trait, which would mean that there is an algorithm that would serve as a measure for verification of the person’s identity. Over time, when the system becomes big enough to cover all of the markets, it could cover all of the transactions made in the world. Naturally, it would require countless teams of people who would monitor the system. But we already have something similar in the world of banking, right? So, we can see that it is possible after all.
The Bottom Line
Even though cryptocurrencies are often affiliated with illegal activities, we can see that it doesn’t have to be like that. Some parts of the system can be used for enhancing the existing system. Without any doubt, this is a very serious question that would require a lot of research in the future. However, we can see that some of its potentials is known even today. We’ve presented you with how cryptos can be used for the prevention of money laundering. We are sure you will find it interesting.