Bill Hughes, senior counsel & Director of Global Regulatory Matters at Consensys, a blockchain software company, said during a Congressional hearing that blockchain technology offers unprecedented insights into the movement of funds, so anti-money laundering efforts should optimize blockchain's traceability. Hughes previously served as an associate deputy attorney general at the Department of Justice.
"Combating money laundering is a difficult task in any space, but digital assets present capabilities with respect to tracking money laundering that law enforcement and the public at large have never before had. Because open, permissionless blockchain ledgers are reviewable by anyone, transactions can be traced using blockchain analytics technology, even those that are purposefully complicated to obfuscate the flow of funds. Any policy response to the threat of money laundering should embrace the transparency of the blockchain and bolster the power of transaction analytics if it hopes to be successful. While analytics technology is helpful now, it must continue to improve if illicit finance in digital assets is going to be sufficiently addressed," said Hughes.
Hughes made these remarks during his testimony in the Nov. 15 hearing "Crypto Crime in Context: Breaking Down the Illicit Activity in Digital Assets," held by the House Financial Services Subcommittee on Digital Assets, Financial Technology and Inclusion.
During this hearing he stated his belief that implementing global regulations for centralized crypto exchanges is essential in combating digital asset money laundering. These centralized entities range from massive international crypto exchanges to "neighborhood shops in far flung reaches of the world," said Hughes.
It's widely acknowledged that illegal financial activity isn't unique to digital assets, according to Hughes. Traditional financial systems are preferred by money launderers while illicit transactions in digital assets constitute a relatively low percentage of total transactions. However, vigilance will be required against increased illicit use of digital assets.
In order prevent increased criminal activity through digital assets, he advocated for "global uniformity" in industry regulation. He added it was "regrettable" how much the U.S. lags behind other jurisdictions in implementing comprehensive regulations and that it should be a priority to "correct that." Hughes also suggested that regulatory sandboxes could offer opportunities for optimizing the benefits of blockchain's analytics and data security technology.
Finally, Hughes recommended expanding public-private partnerships to address issues related to decentralized finance and encouraged law enforcement to make better use of intelligence-sharing for identifying and recovering laundered money.
