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Hong Kong Monetary Authority Sees Blockchain as a Money Laundering Risk

Last Updated March 4, 2021 4:52 PM
Rebecca Campbell
Last Updated March 4, 2021 4:52 PM

A recent assessment from the Hong Kong Central Bank has warned that blockchain could increase the risk of money laundering, according to The Business Times .

In a study, the HKMA said even though bitcoin’s distributed ledger could save on cost and cut down on time, it also had the potential to provide criminals with a way of undertaking illegal activities.

Shu Pui Li, the central bank’s executive director for financial infrastructure, said at a HKMA FinTech Day presentation that:

[Blockchain offers] good potential, but a lot of things need to be addressed.

Banks Are Researching Blockchain

Around the world, banks are researching what the technology can bring to the financial industry that will help to improve the services they offer to its customers. However, while banks are slowly considering it as they further understand the benefits that it can provide.

According to a survey conducted by professional services firm Accenture, 90 percent of U.S., Canadian, and European banks are currently exploring blockchain technology in the field of payments while 30 percent of major banks are already involved in developing or initiating proof-of-concepts of the technology for payment solutions.

The banking industry is investing heavily in blockchain technology.

This despite an earlier report suggesting that while banks see it as providing many useful features, they are finding that putting these features into practice may prove difficult in the long run.

Yet, according to an IBM survey, which gathered insights from 200 global banks, 15 percent of those banks could be running blockchain solutions as early as 2017.

With so many varied reports saying when the technology will be implemented and the possible risks linked to it, one thing that does put it in a positive light is the fact that it can cut costs. According to law firm, White & Case, distributed ledger technology could reduce banks’ infrastructure costs around the world by $15-20 billion a year, reports The Business Times.

Not only that, but with the R3 consortium, of which around 70 global banks are connected to, they are researching into the different ways that blockchain can help banks.

However, even though the HKMA has produced a report on the money laundering risks linked to blockchain that doesn’t seem to have put a damper on financial services turning to blockchain, particularly those in Asia.

Only recently the Oversea-Chinese Banking Corporation (OCBC), announced the first regional use of blockchain technology for remittance services while Japanese banks are exploring blockchain, inadvertently repairing bitcoin’s reputation after Mt. Gox.

Featured image from Shutterstock.