I agree with the author that the exchanges (as they currently stand) are a major foundational weakness in the industry.
What bothers me about this article is this misleading statement:
"Digital-currency cases now account for three-quarters of the time the Federal Bureau of Investigation devotes fighting money laundering, it revealed at a recent Morgan Stanley event. The law enforcement agency also said that most ransom payments are now demanded in Bitcoin or one of its rivals."1) The statement made by the FBI makes it sounds like digital currency accounts for 75% of money laundering proceeds.
2) If they are spending that much time focusing on digital currency related cases, it is because they were told to do so.
3) We know from previous research, that it is cash and complex (usually offshore) financial schemes that facilitate most money laundering.
4) Morgan Stanley was their audience...
Digital Currencies Are Growing on Faltering Foundations -
https://www.nytimes.com/2017/09/29/business/dealbook/bitcoin-ether-cryptocurrencies.htmlThat is indeed misleading Chase. There have been recent cases of large banks laundering massive amounts of money for Mexican drug cartels, and enemies of the USA, in clear breach of US banking laws and those regarding engagement with the enemy.
I don't think that given the current size of crypto that the market is large enough to come anywhere near that -- if the FBI is spending that much of its resources investigating crypto money laundering, it is because they were told to, and likely because there is a political motivation in disseminating that type of message. The fact that many ransoms are being demanded in crypto is unfortunate, and not surprising. It is also likely another reason that compliant cryptocurrencies could rise to the forefront over time by market capitalization, as more businesses and governments get involved with, and sanction their use.
It probably isn't even true that FBI is spending more resources investigating crypto money laundering. It would just be too irresponsible and absurd. The total capitalisation of all cryptocurrencies is an insignificant fraction of all money laundering according to the IMF. So yes, I agree that the statement is likely to be politically motivated.
This does not surprise me. Those with power like to retain it, so are always in favour of stability and maintaining the status quo. So when a new form of money comes along, the basis of their power faces the threat of disruptive technology. What does surprise me is Christine Lagarde's position on it. Of course, getting to where she is I expected her to be savvy and have her finger on the fintech pulse. But to publicly promote a reasonable or even positive image about the future of cryptocurrencies was unexpected.
I would have expected the IMF to be more reactive and want to put out the cryptocurrency fire, before it burned away their position of power. But, maybe they are smarter than that. Change is inevitable, and if you are fortunate enough to see it coming, then it makes sense to spend your energy re-positioning yourself rather than fighting it. Just how the IMF might consolidate their power in a world where both fiat and cryptocurrency are traded in similar proportions I don't know. And maybe they don't know either, but are at least trying to move in the right direction.
And related to both of these is the crack down on fraudulent ICOs. I agree that it is certainly a positive thing, and feel proud to be contributing to a group that recognise we all can be fools and that does not mean we don't deserve help or even protection where it is warranted. But it is interesting that the SEC is choosing to minimise damage early. It would have surprised my cynical side less if the damage was allowed to get so far out of control, that future government attempts to limit and control the use of cryptocurrencies would be seen by the public as well overdue, rather than government over-reach.
So while China plays its hand, Korea follows in its way, and Japan registers exchanges making the Eastern approach to cryptocurrencies seem divided, it looks like the Western attitude is swinging slowly around to somewhere between tolerant and positive.