The principles of transparency that apply to regular banking also apply to virtual currencies such as Bitcoin, the Treasury’s point man on stopping terrorist financing said Wednesday.
Bitcoin “requires compliance,” said Treasury Under Secretary for Terrorism and Financial Intelligence David Cohen. “What we try to do domestically is regulate the financial sector so that these principles of financial transparency are part of what they do, and that they help us really make the financial system inhospitable to illicit finance, whether it’s money laundering or terrorist financing,” Cohen said.
Cohen is more focused on cutting off financing for the Islamic State of Iraq and Syria, an effort that he said last week required new strategies because of the terrorist group’s unusual and diverse streams of revenue.
But he was asked in an interview at the Washington Ideas Forum Wednesday to discuss the possibility that new alternative currencies such as Bitcoin could be used for money laundering or financing terrorism.
“We are, on the one hand, fully supportive of the development of e-commerce and the whole fintech,” Cohen responded about financial technology. “There’s a lot in that that is very helpful in economic development both here and internationally.”
But he added that “what our fundamental objective is, is to ensure that, whatever the value transfer mechanism is — whether it’s through traditional banks, through money service businesses, or through e-currency — that the basic elements of financial transparency apply.”
That means that “people who are involved in the transactions know who their customers are, are able to identify suspicious transactions and report those transactions to the Treasury Department,” Cohen said, which “requires compliance.”
Having been created in only 2009, the peer-to-peer digital payments system Bitcoin has remained mostly outside the regulatory system, with the Federal Reserve and other banking regulators saying they do not have jurisdiction over it.
Law enforcement agencies, however, have investigated the use of virtual currencies for drug deals, money laundering and other crimes.
The Treasury Department office dedicated to rooting out financial crimes, the Financial Crimes Enforcement Network, issued two administrative rulings Monday saying that it will treat some businesses that exchange Bitcoins as if they were regular currency dealers or check cashers.
