(21th-December-2019)
FinCEN regulations
In 2013, the Financial Crimes Enforcement Network (FinCEN) released a paper stating exchanges and administrators of VC are subject to the Bank Secrecy Act (BSA) and must register as a Money Services Business (MSB). The purpose of this legislation was to prevent financial exchanges from being used to launder money or finance crime, including terrorism. The European Central Bank has also recommended registering exchanges to "reduce the incentive for terrorists, criminals and money launderers to make use of these virtual currency schemes for illegal purposes".
In spite of the BSA applying to VC exchanges and administrators, VC is still used to finance crime and launder money because not every transaction in VC networks are required to comply with the BSA and not every online exchange complies with the BSA. In September 2014, Robert M. Faiella, a/k/a "BTCKing", pleaded guilty to operating an unlicensed exchange that exchanged over a million in cash for Bitcoin, used for criminal enterprise and known as "Silk Road". Despite BSA regulations, Faiella and the users of his exchange, were able to hide their identity through both pseudonymous Bitcoin addresses and an anonymous network that hid their IP addresses.
Money laundering
The culture of laundering money in the Bitcoin network is so prevalent there is even a website called bitlaunder.com. The company bitlaunder.com claims they are "experts at laundering Bitcoin" and they "use the most sophisticated methods available to completely anonymize your Bitcoins and obscure their history from forensic tracing". The U.S. Government Accountability Office reported that the pseudonymity in VCs makes it difficult for the government to detect money laundering and other financial crimes, and it may be necessary to rely on international cooperation to address these crimes. Similarly, the European Banking Authority claimed that regulations should strive for "global coordination, otherwise it will be difficult to achieve a successful regulatory regime". In spite of the best regulations from the United States and the European Union, the inherent nature of the Bitcoin protocol allows for pseudonymous transfers of Bitcoins to or from anywhere in the world, so illegal transactions will not be completely eliminated through regulations.
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