A new survey by RUSI and ACAMS has revealed how professionals in the cryptocurrency industry believe that governments are behind the curve on the perceived risks, opportunities, and regulation of cryptocurrency.
The survey, the second commissioned by RUSI and ACAMS, is based on responses from across the global financial and cryptocurrency industries, including cryptocurrency exchanges, financial regulators and financial intelligence units.
While the survey reflects doubts about the abilities of government, the cryptocurrency industry is ‘much more confident in their own tools and preparedness than other audiences,’ to mitigate potential risks in the sector.
Criminal activity remains top of the mind to both governments and crypto industry professionals, with 70% of total respondents highlighting this as a concern.
When asked to select any areas of concern, respondents overall indicated they are worried about the use of crypto for money-laundering (84%), on the dark web (84%), for procurement of illicit goods (83%) by sanctioned actors (82%), by terrorist organisations (79%), to fund human trafficking (76%), and in fraudulent initial coin offering (75%).
However, the survey demonstrates a disconnect between governments and the industry on the nature of risks posed by crypto, and ongoing concerns over the use of cryptocurrency for criminal activity. The cryptocurrency industry was notably less worried about each of the listed risks, considering only sanctions evasion as high priority.
The survey finds respondents split over whether they consider cryptocurrency a risk or an opportunity – with significant gaps between government and financial industry perceptions and those directly involved in the crypto industry.
The industry largely believes that crypto transactions offer more transparency than traditional financial transactions, and that transactions are compatible with sanctions screening and compliance, while financial institutions and government disagreed.
While crypto professionals are aware of the risks in their industry, other actors such as the media, politicians and the general public are less aware of the risks.
Overall, there is a far higher likelihood (78%) that institutions will seek guidance from non-governmental organisations such as FATF, trade bodies, and blockchain associations, than from governments.
Respondents of the survey are also of the view that governments are more likely to defer to international bodies (45%) over their own regulatory systems (35%).
“The crypto industry appears to have an great amount of confidence in their own abilities to counter and detect risk, whereas government doesn’t have nearly as much faith,” explains Kayla Izenman, Research Analyst with the Centre for Financial Crime and Security at RUSI and co-author of the survey.
“Bridging this gap is essential, as all sectors agree that the use of cryptocurrency is on the rise, but we know there’s no clear consensus on domestic regulatory action. This risks opening the door to illicit activities.”
- An overwhelming majority of respondents were concerned about the links between cryptocurrency and criminal activity. However, where other respondents ranked illicit purposes highly, the crypto industry ranked illicit purposes as the least common use.
- The cryptocurrency industry and other respondents were divided on their perceptions of cryptocurrency risk – 63% of banks and 56% of governments saw cryptocurrency as a risk, as opposed to only 9% of the cryptocurrency industry.
- Asian financial institutions appear to be more friendly towards cryptocurrency (42% indicated easier use than fiat currency) than North American and European financial institutions.
- All respondents believed that the use of cryptocurrency for day-to-day payments will increase in the next five years.