State-run currency could be used to evade controls, launder money, WARNs finance expert
Russia recently signaled its intention to enter the booming world of digital currency when it announced plans to introduce the “CryptoRuble.”
But unlike transactions with standard decentralized cryptocurrencies, which are verified and conducted anonymously through open-source technology, transactions with the CryptoRuble would be verified by a central government authority.
In addition, the government would own the encoded information associated with the digital currency’s users and thus have potential leverage over them.
These and other implications of a state-run digital currency system are “worrying,” Carey Business School Assistant Professor Jim Kyung-Soo Liew (right) cautions in a commentary for Risk.net.
Such a “disruptive” system could be used by a government to evade external controls, and people with bad intentions could use it to launder ill-gotten gains, says Liew, an expert in finance.
The anti-money-laundering aspect of open, decentralized cryptocurrencies such as Bitcoin is a key part of their appeal. Russia’s CryptoRuble reportedly would differ by not strictly requiring knowledge of the transactors’ fund sources.
If users offered no proof of the origin of their funds, they would have to pay a 13 percent fee. Liew says some bad actors would be glad to take the “13 percent haircut” for the opportunity to hide their profits inside Russia’s digital currency system.
Whether or not it is designed for this purpose, it could be employed that way, according to Liew, who co-wrote the commentary with Professor Zura Kakushadze of the Free University of Tbilisi.
A single Bitcoin reached an all-time value of $11,395 on November 29. It fell to $9,400 on November 30 after a day of volatile trading.
The full article by Liew and Kakushadze can be read here at the Risk.net website. A regular or trial subscription is required.