Hong Kong Central Bank: Blockchain may raise the risk of money laundering

posted over 1 year ago
The Hong Kong Monetary Authority has released a sobering assessment of blockchain including a warning that it may raise the risk of money laundering.

The anonymity afforded by some distributed ledger platforms may facilitate illicit activities such as the trafficking of criminal gains, the sale of illegal goods and ransom payments, the HKMA said in a study on the technology released Friday.

While the report highlighted blockchain’s cost and time-saving qualities, the technology predicated on a shared network of transaction records also offered legal, risk management and regulatory issues, the HKMA said.

Distributed-ledger technology offers “good potential, but a lot of things need to be addressed,” Shu Pui Li, the central bank’s executive director for financial infrastructure, said as part of a presentation for the HKMA Fintech Day. “The most painful issue is legal. A lot of legal issues.”

The HKMA study throws a cautionary light on a technology that banks around the world are researching for use in areas such as trade finance and mortgages, as they try to trim expenses and boost profitability. Blockchain could reduce banks’ infrastructure costs worldwide by $15 billion-$20 billion a year by 2022, according to law firm White & Case.

It was too early to make any definite conclusions about distributed ledgers and the HKMA is aiming to produce a second report with more in-depth analysis, Li said.
Tags: blockchain, opinion