Cryptocurrencies and blockchain are two very complicated and technical subjects which require an in-depth study and efforts to understand. This is what lacks among most regulators and critics of, which leads to various accusations resulting from unawareness.
Facebook’s Vice President for Messaging Products, David Marcus said during the launch that Libra will have a dual effect, as it will prevent money laundering, and will also people to use more and more of digital cash. Though on the face it sounds good, a more in-depth look at it as if admitting that cryptocurrencies were previously used for money laundering and Facebook will be the new Avenger to end it.
Is crypto used for money laundering?
Yes, that’s the dark side of crypto assets. Anyone can use it, with full anonymity and privacy, a perfect tool for criminals. Recently, a Spanish drug cartel was busted, which used two crypto ATMs to transfer cash from one place to another. Moreover, there have been several other instances where money was laundered, but the agencies failed to crackdown the culprits due to use of cryptocurrencies.
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In fact, the risk of such criminal activities is higher in case of privacy-focused digital coins like Monero, which completely conceals the identity of the sender and receiver. Coupled of days ago, the inter-government organization on money laundering Financial Action Task Force (FATF) also announced that it would lay down stricter regulations for crypto companies which they will need to comply with mandatorily.
Will Facebook be able to stop money laundering?
Despite Marcus’s claim, preventing money laundering via Libra will be a daunting task, given the size of the user base expected to embrace it. Moreover, distinguishing between actual transactions and laundering might also be a bit difficult, since users with multiple accounts could be a big problem.
Moreover, knowing that they’ll be under the scanner continuously, many genuine users will also be put off. It is already a ‘grizzly bear’ sized task for Facebook to garner the trust of is users for Libra, especially after the Cambridge Analytica debacle and various privacy breach accusations. Watching transactions will be the last thing an avid crypto trader wants from Facebook.
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Marcus’s statement, however, could still hold its ground in one way. If the company manages to implement a system which detects laundering without letting the Libra Foundation or the authorities to scan every transaction, laundering could be prevented. But the problem is implementing such a system in a blockchain, which is decentralized distributed ledger, is next to impossible.
