Digital currencies will make BSA compliance easier
In yet another sign that Facebook has grown too large for Mark Zuckerberg’s skill set, the Wall Street Journal reported Tuesday that Facebook’s ambition to create a cyber currency called Libra, in association with a group of large banks and payment processors is losing momentum. The paper reports that would-be investors are backing away from the project in the face of stiff opposition from regulators. For those of you who just don’t like Mark Zuckerberg, or who fear that a cryptocurrency is yet another on the ever-growing list of putatively existential threats facing the industry, this is good news. For those of us who believe that the reactionary rejection of Facebook’s idea is based more on ignorance than legitimate regulatory concerns, this is too bad.
What really got me fired up was this paragraph in the WSJ article: “government officials and central bankers were quick to criticize the project, citing concerns about how the network would protect users’ privacy and prevent criminals from using it to launder money.” In fact, a well-functioning digital currency system will greatly reduce money laundering. Here’s why.
Labor and bitcoin technology are based on distributed ledger technology. With apologies to IT people who will probably cringe at this explanation, the basic idea of distributed ledgers is that software converts each new digital transaction into a unique digital block which is added to a block chain produced by previous transactions. The technology has the ability to simplify everything from contracts to land title searches by creating a single chain of evidence that can be accessed from multiple computers. For example, let’s say that contract you are entering into requires a wet signature. If you could enter into that same contract using block chain technology, both parties to the agreement would have instantaneous and unequivocal proof that the contract has been signed and agreed to. Legislation has even been introduced that would preempt state laws seeking to prohibit the use of block chain technology in commercial transactions.
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