Crypto Centralization & Bitcoin Bans: the Americas
Last week I provided a snapshot into the cryptocurrency situation as it exists on the Asian Continent and, as promised, this week’s post provides a similar snapshot of the Americas. As with the Asian Continent review, there are simply too many countries in the Americas for me to focus on the entire group in one post without violating the rules of TL:DR. Rather, I will focus on some of the Americas’ crypto hotspots, which include the USA, Mexico, El Salvador, Columbia, Panama and Brazil.
As with everything I write, all topics wrap back to money laundering, and especially the topic of cryptocurrency. As we speak there is no better platform to launder stolen cash, mostly because crypto is decentralized. Therefore there are zero government regulations in place anywhere in the world that might motivate crypto coin operators or exchanges to comply with the types of AML regulations that banks typically deal with. For cyber criminals, it is like the wild west.
That being said, a large number of countries are aware of the AML issues surrounding crypto and are working to create their own, centralized digital currencies and in some cases, such as in China, ban decentralized currencies such as Bitcoin altogether. Once that happens history’s most productive cash washing machine will cease to function. Until then the floodgates are open! That’s not to say no FINcrooks are getting caught, because they are, but the percentage is low.
Here is a snapshot of select countries from each region of the Americas, and where they currently stand in terms of cryptocurrency.
North America
Mexico: We all remember El Chapo, correct? The world’s most notorious drug cartel in 2016 was also a master money launderer. Unfortunately, it is also the money laundering charges that stuck where others fell by the wayside. His Sinaloa cartel is still going strong but is now fighting with the Jalisco New Generation Cartel (CJNG), the Gulf Cartel, Juarez Cartel and more for deeper control. The cartels have deep pockets and as a result, are technologically savvy and constantly in need of sources to launder their illicit funds. Why wouldn’t they be big on crypto?
According to an article published in The Hill by Texas (R) senator Tony Gonzales, “cartels have been on the leading edge of technological innovation for decades. Their drones, stealth submarines, and encrypted technologies rival the world’s best intelligence agencies. And while a 2018 Mexican law mandated that registered crypto trading platforms report transfers exceeding 56,000 Mexican pesos (approximately $2,800), Mexican law enforcement has neither the manpower nor the technological prowess to do much with the information collected.”
Mexico is pretty much a lawless country run by the cartels at this point. Decentralizing crypto is the least of its Government’s priorities.
United States: The US government now realizes how much money is being laundered through crypto, and it will take steps to either regulate the existing coins and exchanges, or make them illegal as China did, and then replace them with one US-backed digital currency. The Federal
Reserve Board has made a couple of announcements which, in summary, say they are evaluating digital currencies and developing a plan for how to proceed.
Last August FRB Governor Lael Brainard said in a webcast speech that, “the Federal Reserve is active in conducting research and experimentation related to distributed ledger technologies and the potential use cases for digital currencies. Like other central banks, we are continuing to assess the opportunities and challenges of, as well as the use cases for, a [Central Bank Digital Coin] CBDC, as a complement to cash and other payments options.”
If the Federal Reserve is discussing a potential American crypto currency publicly, then it is already way past the planning stages. They don’t make mistakes like that in the press. If they are talking about it today then we should see something interesting emerge in the near future. Until then we will have to just wait and see.
Canada: Our neighbor to the North is not so keen on the idea of decentralization. In fact, last December the Canadian government issued new money laundering indicators applicable for virtual currency transactions in order to try and gain some control and is currently developing its own coin-based digital currency.
Central America
El Salvador: the situation in El Salvador is one worth keeping an eye on. In September I published, El Salvador, Bitcoin and Whispers of Money Laundering shortly after its President Nayib Bukele and his administration adopted Bitcoin as a legal tender and launched an app called Chivo, that would allow its citizens to convert Bitcoins into cash. As I stated then, I think the adoption of Bitcoin as legal tender in El Salvador stinks. Why?
— Cryptocurrencies are volatile (stating the obvious here).
— Accessing Bitcoin requires access to technology, a fairly big problem for Salvadorans. Also, ATMs could become constant crime scenes.
— The Chivo app has the potential to be the money laundering app of choice for bad actors.
South America
Columbia: Home of the Original Cartel (OC?), Pablo Escobar, a man who was a proficient money launderer, but who could have greatly benefited from cryptocurrency. Today, Columbia is still infested with powerful cocaine cartels like Escobar, and it is largely a cash-based society thanks to its proximity to Venezuela and its worldwide trading marketplace. In order to help its citizens turn that into crypto, Columbia did what El Salvador did by installing cryptocurrency ATMs. In fact, it owned the largest number of these ATMs in Central America prior to El Salvador’s launch.
Not surprisingly the growth of cryptocurrency popularity in Columbia soared. According to CoinDesk, in 2020 Chilean crypto exchange Buda.com recorded $31.1 million in traded volume in Colombia. During the first three months of 2021 the exchange recorded close to $40 million traded in Columbia on its platform. Reports of money laundering also soared. Like the Mexican cartels, the Columbian cartels have glommed onto Bitcoin as the central platform for cleaning their illicit cash. Regulators have taken note and cryptocurrency centralization is likely in Columbia’s future, although I don’t think we will ever see a crypto ban in Columbia.
Brazil: If you happened to pay attention to Bitcoin influencers on Twitter, or to a few overly aggressive Bitcoin media outlets you would have thought Brazil was next in line to pull an El Salvador by declaring Bitcoin legal tender.
It is almost embarrassing how wrong those journalists and ‘influencers’ were because the Bitcoin Bill was not drafted to make Bitcoin legal tender in Brazil, but rather to establish a system designed to regulate Bitcoin and all other cryptocurrencies.
Again, as a disclaimer, I understand that there are a lot of countries in the Americas that are not listed above, but I don’t think either of us has enough time in our lives anymore to actually read an article as long as one that included every country would be. Next up, Europe and the UK!
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