Special Counsel Roy Keidar of law firm Yigal Arnon & Co examines how Blockchain could provide the answer to the anti-money laundering issues that cryptocurrencies face.
In what some are coining a landmark case, an Israeli District Court recently ruled that Israeli banks are not obligated to provide financial services to companies whose primary business is trading in cryptocurrencies, such as Bitcoin or Ethereum.
The Court reasoned that banks should not have to assume the risks associated with providing a financial platform to these digital currency businesses when the leading Israeli authorities on the subject, namely the Central Bank, the Securities Authority and the Anti-Money Laundering and Terror Financing Authority, have been struggling to delineate clear measures to minimize them.
One of the primary risks noted by the Israeli authorities, along with regulators around the globe, is the pseudo-anonymous nature of cryptocurrency. Regulators view the digital token transfer method as a “black box,” low in accountability and virtually impossible to subject to existing anti-money laundering (AML) and anti-terror financing regulations. However, inflexibility may be clouding judgment: built-in features of cryptocurrency, particularly Blockchain technology, have the potential to improve, not harm, AML efforts, even surpassing mechanisms already in place today.