In its November 2024 report, the Bank of Italy has labeled Bitcoin peer-to-peer (P2P) services as “crime-as-a-service,” underscoring a critical view amidst the backdrop of increasing institutional acceptance of cryptocurrencies. While Bitcoin gains traction in corporate treasuries and is recognized for its potential as a transformative financial asset, the Bank of Italy’s stance adds a layer of skepticism to this narrative.
The report specifically critiques the use of P2P platforms for enabling money laundering, particularly in regions with lax regulatory frameworks. These platforms, according to the Bank, take advantage of regulatory gaps, providing a means for criminals to hide the origins of illicitly gained money. The focus is on unregulated P2P exchanges and informal networks that sidestep conventional KYC and AML checks, thereby creating avenues for illegal financial dealings. The anonymity offered by blockchain technology further complicates the tracking of these transactions, allowing criminals to operate away from the oversight of centralized financial bodies.
The document also delves into the broader challenges associated with decentralized finance (DeFi) in the context of anti-money laundering efforts. Unlike centralized finance platforms, DeFi operates without intermediaries, which significantly hampers regulatory oversight. While blockchain technology is lauded for its transparency and the permanence of its records, it also presents opportunities for misuse due to the pseudonymous nature of transactions.
In response to these issues, the Bank of Italy discusses technological advancements like Zero-Knowledge Proofs (ZKP), which could theoretically allow for better confidentiality while still providing mechanisms for regulatory compliance. However, the report conveys skepticism about the sufficiency of these technologies in offering the level of ongoing vigilance required to detect and prevent criminal activities effectively.