In April 2013, Fighting Fraud reported that the U.S. Treasury will apply money laundering rules to virtual currencies used to make payments online.
In order to manage these payment methods effectively, regulators need to understand the risk they do (and do not) pose.
The scale, rate and nature of technological change continues at a staggering pace, but it is the associated change in human behaviour that requires the most attention. The problem, after all, is not about what technology can do, but the fact that every technological development can be misused.
The fact is that the world has gone digital, the high street has gone online and business has gone global and this means that ‘the Internet genie is out of the technological bottle’. Regulators need to understand and respond to this by adapting to the digital world themselves and to do this successfully they must invest in analytical approaches, technical tools and their industry relationships.
It would be a fundamental mistake to assume that anonymity is criminal and that technology is bad. It is also wrong to assume that digital payments carry more risk than mainstream methods of payment. Provided they are well designed, well regulated and well conducted then new payment technologies should not be ignored.
That is why the key requirement is to really get to the root cause of the risk, to apply fundamental regulatory principles and determine what needs to be done, and then to combat that risk by using technology to make regulatory interventions as efficient and effective as possible.
A digital world needs digital payment mechanisms to create economic value, meet customer needs and support business innovation. It also needs regulation around the digital environment and this means that traditional approaches to developing regulatory intervention need to adapt.