The increasing popularity of cryptocurrencies has got Bitcoin making inroads into the mainstream financial ecosystem. With more people using Bitcoin as a medium of exchange and store of value, there are concerns of digital currency being used by wealthy individuals for tax evasion, money-laundering, and other illegal activities. Among few circles, Bitcoin has been equated to the Swiss bank accounts, which were once well-known for privacy and anonymity (more like pseudonymity).
Being a decentralized cryptocurrency, Bitcoin enjoys no interference from any third party organizations or governments. This very feature makes it a popular financial instrument to circumvent various regulatory restrictions. However, the privacy and “anonymity” associated with Bitcoin is in no way comparable with that of Swiss bank accounts.
The transparent nature of Bitcoin blockchain, combined with some of the latest blockchain analysis software makes Bitcoin transactions more accountable than fiat transactions. Making the digital currency users and platforms more accountable, governments and regulatory bodies across many nations are increasingly forcing Bitcoin companies to implement stringent AML and KYC policies.
The increasing prominence of Bitcoin has also got mainstream banking sector looking into its adoption. Few online-only banking institutions like Fidor bank have already taken a Bitcoin-friendly stance. In addition, some of the leading banking and financial institutions are also looking into the creation of Bitcoin backed Exchange Traded Funds and Tracker Certificates. These instruments represent a confluence between traditional financial and cryptocurrency ecosystems.
Bitcoin clearly has the potential to work together with the existing financial system, ensuring a certain level of privacy along with increasing transparency and accountability. But the same can’t be said about other cryptocurrencies like Monero and ZCash which promises high levels of privacy and anonymity.
The very nature of Bitcoin blockchain has been the driving force behind the adoption of distributed ledger technology by banking and financial institutions. In the coming days, Swiss banks, under pressure from governments and with the implementation of blockchain technology will soon lose the tag of being exclusive, private and anonymous.
Ref: Investopedia | Image: Shutterstock