| dc.description.abstract | While blockchain technology comes with many new features and opportunities, it also risks that the technology might be used for illicit activities. In particular, money laundering has been illustrated to be facilitated by cryptocurrencies. Due to this, this thesis aims to systematically review the current literature on how to mitigate the risk of money laundering in cryptocurrencies. The methodology will be the process of systematic review as described by Kitchenham et al. (2009), and the relevant papers will be retrieved from Clarivate’s Web of Science.
The findings of the review illustrate four different categories of what affects the risk of money laundering in cryptocurrencies: Regulations, Blockchain analysis, Compliance, and Privacy & Fundamental rights. From the research provided on these four categories, I identified three different perspectives on how to mitigate money laundering in cryptocurrencies and how this should or could be accomplished – a summary of the findings follows.
The first perspective emphasizes the traditional mindset of combating money laundering, where money laundering is mitigated through the compliance of obliged entities that conduct customer due diligence like know-your-customer checks and suspicious activity reporting.
The second perspective attempt to embrace one of the core innovations of blockchain technology – disintermediation. This perspective emphasizes the need to shift from user-based sanctioning to transaction-based sanctioning. By utilizing blockchain analysis to detect, trace, blacklist, and “de-facto seize” the virtual assets themselves, it should be possible to mitigate the risk of money laundering.
The third perspective embraces the privacy-enhanced features of cryptocurrencies, stating that privacy, data protection, and fundamental rights are essential. This perspective emphasizes the need for regulators and developers to cooperate in developing new, privacy-enhanced blockchain solutions that integrate anti-money laundering features that financial intelligence units can access at the protocol level. This way, privacy and data protection could be protected while also mitigating the risk of money laundering in cryptocurrencies.
The findings can have implications for regulators, lawyers, blockchain developers and researchers. My thesis emphasize a need for more research on all these perspectives.
Keywords: Cryptocurrency, Blockchain, Money Laundering, Privacy, Blockchain Analysis | |