In its annual “Money Laundering and Terrorist Financing Risk Assessment Report”, the Hong Kong government and its financial authorities noted that Bitcoin is largely left out of organized crime and money laundering, and emphasized that Bitcoin is not used to finance criminal activities and that its risk is relatively low.
According to Hong Kong government, virtual currencies including Bitcoin and Ethereum have generally not been used to commit money laundering or terrorist financing. Within a 4-year period between 2013 and 2017, 167 bitcoin-related financial crime reports were made to the Hong Kong Police Force. The vast majority of these reports were related to ransomware attacks like WannaCry, and were not necessarily related to financial crime, money laundering, or terrorist financing.
“Most of the reports involved blackmail using ransomware (such as the recent ‘WannaCry’ attack), and the figure is comparatively low compared with that in other jurisdictions. Investigations and intelligence do not suggest VCs were used or intended to be used in other prevalent predicate offenses (e.g. drugs, dutiable goods smuggling) or TF. The threat level is low,” reads the report.
Over the past 9 years, the go-to argument of Bitcoin critics against the widespread adoption and usage of digital currencies has been the applicability of virtual assets in financial crimes. Banks, financial institutions, politicians, and economists have claimed that the main use case of Bitcoin is to finance terrorism and commit money laundering, leading the media to develop uneducated speculations around the market.
Earlier this year, in April, Quebec Government chief scientist publicly stated that Bitcoin is wrongly linked to mass money laundering. Francis Pouliot, a French bitcoin researcher, said, “Quebec Government Chief Scientist declares that Bitcoin is not used for money-laundering unlike cash and has almost no impact on criminal activity.”
The official publication of the Quebec Government chief scientist’s office quoted attorney Erwan Jouncheres as saying:
“The anonymity of bitcoin is a myth. There is no more transparent money because you have to go through a platform where you have to give personal information. At the very least, [even if a name is fake] we always know the address of the transmitter and that of the receiver.”
Gradually, governments that oversee major cryptocurrency markets have started to understand the primary purpose of cryptocurrencies and their low threat in money laundering. The Hong Kong government, which oversees the fourth largest cryptocurrency market behind the United States, Japan, and South Korea, is the latest government to acknowledge the low threat of cryptocurrencies in money laundering and terrorist financing.
More importantly, the report of the Hong Kong government emphasized that virtual currencies are not legal tenders, stating that while the use of Bitcoin is negligible, it should not be misunderstood as a legal tender.
“VCs are not legal tenders and not accepted for payment in Hong Kong. The exchange of Bitcoin in person is not popular. The market for VCs, in particular for Bitcoin, has undergone notable fluctuations triggered by speculation, as well as the introduction of regulatory framework over Bitcoin in Japan. Domestically, the use of Bitcoin remains at a negligible level,” read the report.
The term legal tender is often misunderstood by investors, as it is confused as a legal form of money. Legal tender signifies a currency or an asset that is illegal not to accept. Hence, while it is certainly legal to accept Bitcoin, merchants are not punished for not accepting bitcoin.