Anti-money laundering in the age of cryptocurrency
The cryptocurrency market has been growing exponentially, with the number of digital coins hitting a record high. By 2025, the global cryptocurrency market can reach US$ 6.716 trillion! So how are we going to keep track of this new asset class? And most importantly: how can you protect yourself from fraudsters?
Table of Contents
Introduction to cryptocurrency
It is a type of digital money used to secure transactions. Since it operates without a central bank or regulator, it is also known as a decentralized payment system.
Cryptocurrency networks use blockchain technology to verify transactions on their respective blockchains (the shared records of all transactions that have occurred within their systems).
The process works like this: When you send money from one account to another on your cryptocurrency network, what happens is that a "transaction" gets added onto each block in sequence until it reaches the end, where it's confirmed as valid by miners who also confirm new blocks every 10 minutes (or less often depending upon how fast they want things moving).
How cryptocurrency works
Cryptocurrencies come in many different forms — Bitcoin, Litecoin, and Ethereum are just three examples — but they all share one thing: They're decentralized systems that allow users to exchange value over the internet without any third parties getting involved.
There's no need for banks or governments because cryptocurrencies use blockchain technology (the same technology used by Bitcoin) instead of relying on existing financial institutions like banks or credit card companies.
Anti-money laundering regulations and crypto assets
Cryptocurrencies are new asset class that has not yet been regulated. This means that cryptocurrency exchanges have no special anti-money laundering procedures and must rely on the AML policies of their national banks or other financial institutions.
The absence of regulations for cryptocurrencies creates a severe problem for those who want to do business with them: how do you know whether an exchange will accept your money?
The anonymity offered by cryptocurrencies makes it easy for criminals to hide their identities behind multiple digital wallets, making it more difficult for regulators and law enforcement agencies to track down criminals using BTC or altcoins (alternative coins).
How a cryptocurrency exchange works
A cryptocurrency exchange is a place where individuals can buy and sell cryptocurrencies. They usually have many different cryptocurrencies, such as Bitcoin, Ethereum, and Ripple.
The government regulates exchanges to ensure that they follow anti-money laundering (AML) regulations to ensure that customers are not conducting criminal activity on their platform. Exchanges must comply with (KYC) know your customer, which means they must verify who you are before allowing you onto their platform.
The cryptocurrency industry is very young but has already seen growth in popularity and legitimacy.
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