'Bring cryptocurrency traders into regulatory fold'

Bitcoin and its ilk are rarely out of the headlines these days. Stories about rollercoaster prices, investment risk and money laundering abound.

In Latin America, there has been a flurry of warnings by state institutions, mostly concerning the second issue.

Government-owned Banco Nacional de Panamá has urged people to steer clear of cryptocurrencies, warning there were no regulations in place to protect investors and that rules needed drawing up. While at Brazil's central bank, virtual currencies were branded a "typical bubble" and rules were issued banning investment funds from buying cryptocurrencies.

Guatemala, Dominican Republic and Ecuador, among others, have voiced concerns, while Bolivia has banned virtual currencies outright.

In Mexico, a fintech bill that covers cryptocurrencies is in congress. Under the draft legislation, cryptocurrency transactions require central bank authorization.

Meanwhile, Venezuela has announced its own cryptocurrency - the Petro - and issued rules requiring bitcoin miners to register with the government.

Globally, the third issue - money laundering - has been making news. Germany's central bank called for cryptocurrencies to be regulated on a global scale, citing concerns over its use in money laundering and the financing of terrorism. And Europol told the BBC that 3bn-4bn British pounds (US$4.22bn-US$5.62bn) in criminal funds in Europe was being laundered through cryptocurrencies.

IMF chief Christine Lagarde told CNNMoney recently that regulation was "inevitable."

"It's clearly a domain where we need international regulation and proper supervision," she said.

In the US, there are calls for a specific federal regulation governing cryptocurrencies, which are currently regulated under laws governing money service firms such as Western Union.

Among those seeking legislative action is Florida International Bankers Association (FIBA), which is working with Florida lawmakers on a state-level bill that would regulate local virtual currency traders and other players such as operators of virtual currency ATMs.

FIBA CEO David Schwartz told BNamericas specific regulations are needed to govern virtual currency traders, particularly because of the veil of anonymity that shrouds transactions.

"If we really want a global move to transparency then we need to bring them into the fold," said Schwartz, speaking ahead of the 18^th Annual FIBA AML Compliance Conference in Miami, FL, on March 12-14.

The issue of transparency is central to any discussion about why pioneering cryptocurrency bitcoin was created.

Schwartz said: "Everyone is wondering why bitcoin was created, who created bitcoin. Part of it, if you talk to many of these people, is anonymity or why should everybody know about my financial transactions and what I am doing, Well, there's good reason for that, it's called money laundering, it's called terrorist financing."

He added that regulations shouldn't shackle those seeking to develop the financial services industry.

"We don't want to stifle innovation," Schwartz said. "That's one of the things we want to avoid because innovation is important across the industry, but at the same time we can't have these unregulated entities out there that can be used for money laundering and terrorist financing activities."

Tax evasion by cryptocurrency investors is also an issue. Authorities in the US have begun investigating the matter and seeking - and have obtained - client records.

"At this point virtual currencies are seen more as an investment than a true currency and people make a lot of money off this but, apparently, no tax is being paid," said Schwartz

THE CONFERENCE

During the three-day conference delegates will discuss key issues such as the use of gift cards to launder funds, the convergence of cybersecurity and AML, cross-border investigations, risk mitigation, the use of technology to prevent financial crime and how casinos fight money laundering. Human trafficking, virtual currency regulation and trade-based money laundering will also discussed at the event in Miami.