As a seasoned crypto investor with over a decade under my belt, I’ve witnessed the rollercoaster ride that is the cryptocurrency market. While I’ve seen major institutions embrace Bitcoin and other digital assets, it’s not all sunshine and rainbows. The recent report by the Bank of Italy has cast a shadow on P2P services, labeling them as “crime-as-a-service.
Though significant global establishments are progressively adopting Bitcoin, viewing it as a promising financial instrument and sometimes including it in their business reserves, the overall view of this digital currency is still far from being uniformly optimistic.
As more institutions embrace it, the Bank of Italy has expressed a particularly skeptical viewpoint. In a recent publication titled “Economic and Financial Occasional Paper,” they referred to Bitcoin’s peer-to-peer services, often praised for their convenience, as essentially facilitating illegal activities, terming them as “services that enable crime.
Bank of Italy Raises Red Flag on Bitcoin P2P
In a report published in November 2024, the Bank of Italy pointed out that Bitcoin peer-to-peer (P2P) platforms are increasingly being used as methods for money laundering, particularly in regions with lax regulations. These platforms, often referred to as “criminal services,” take advantage of regulatory gaps, enabling illicit actors to mask the source of their illegally acquired funds.
A 131-year-old financial institution is focusing on unregulated peer-to-peer platforms and informal exchange networks, which often avoid standard Know-Your-Customer (KYC) and Anti-Money Laundering (AML) procedures. These networks can provide avenues for illicit activities because they lack the traditional oversight. Criminals use these systems to dodge the watchful eyes of centralized financial intermediaries by exploiting the anonymity of transactions on blockchain networks.
Regulatory Gaps
The report from the Bank of Italy additionally emphasized the difficulties in preventing money laundering that arise with Decentralized Financial (DeFi) systems. Unlike Centralized Finance (CeFi) platforms which can be governed in a manner similar to traditional financial institutions, DeFi platforms function without intermediaries, leading to significantly more intricate supervision due to their decentralized nature.
Using different identities during transactions on the blockchain ensures anonymity, as each user interacts through distinct, unconnected addresses. This has ignited a discussion among some who value the technology’s openness and permanence, while others point out its possible misuse.
The report points to emerging solutions like Zero-Knowledge Proofs (ZKP), which enable selective disclosure of information to mitigate illicit activities without compromising user privacy. However, these innovations, though promising, fall short of providing the continuous due diligence necessary to identify suspicious activities systematically, as per the Bank of Italy.
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2024-12-26 01:40