Bitcoin and modern alchemy: in code we trust

Abstract

Purpose– This paper aims to explore the challenge posed by Bitcoin to regulators, particularly anti-money laundering regulators. Bitcoin is a crypto-currency based on open-source software and protocols that operates in peer-to-peer networks as a private irreversible payment mechanism. The protocol allows cross-border payments, for large and small items, with little or no transactional costs.Design/methodology/approach– Case studies and case law are examined as are relevant reports by regulators.Findings– Bitcoin is based on complex computer code supported by a robust community in a peer-to-peer network. Unlike other virtual currencies, Bitcoin appears to have obtained purchase and as such poses unique challenges to regulators.Research limitations/implications– Bitcoin is at a nascent stage and the evolution of the virtual currency is difficult to predict.Practical implications– Those who study financial systems, anti-money laundering regimes and asset forfeiture laws will have an interest in this topic.Originality/value– This is a new and emerging currency; there is limited literature on the implications of this currency to anti-money laundering systems.