However, a London-based company has set up a storage service that insures deposits of the digital currency against loss and theft. Elliptic Vault stores private encrypted keys to bitcoins on offline servers in a secure location. The company is underwritten by Lloyds of London.
The attraction of digital currency is largely around the small fees charged by digital currency exchanges to convert it to local currency: perhaps less than 1 per cent. That clearly is also an easy opportunity to launder money because no details are recorded of the owner of the digital currency. Rather, it is like a bearer bond where whoever has it can cash it.
In New Zealand, the Department of Internal Affairs' anti money laundering unit says it is in touch with some firms which have expressed interest in offering digital currencies and is keeping up to date with developments internationally.
Kate Reid, manager financial integrity, says no firms are currently operational in New Zealand but if they do set up they will have to ensure they meet their obligations under legislation. This means they will have to have in place:
- A Risk Assessment of the money laundering and financing of terrorism that they could expect in the course of running their business
- An AML/CFT Program that includes procedures to detect, deter, manage and mitigate money laundering and the financing of terrorism
- A Compliance Officer appointed to administer and maintain their AML/CFT program
- Customer Due Diligence processes including customer identification and verification of identity
- Suspicious Transaction Reporting, Auditing and Annual Reporting systems and processes.
"It would be our role to ensure the companies meet those obligations," she says. "This is very similar to other regulated parties and it would be relatively easily to adapt our current systems if needed."
Sign up for CIO Asia eNewsletters.