Bank of Italy Says P2P Bitcoin Services ‘Crime as a Service’ Amid Growing Acceptance

While the world’s leading institutions are gradually adopting Bitcoin, recognizing its potential as a transformative asset and even integrating it into their corporate treasuries, the perception of the cryptocurrency is far from universally positive.

In the midst of this growing institutional adoption, the Bank of Italy has adopted a remarkably critical position. In his economic and financial occasional paper, he labeled Bitcoin’s peer-to-peer (P2P) services, widely celebrated for their accessibility, as “crime as a service.”

Bank of Italy raises red flag on Bitcoin P2P

The Bank of Italy’s November 2024 report highlighted the growing role of Bitcoin peer-to-peer (P2P) services as tools for money laundering in jurisdictions with weak regulations. These services, described as “crime as a service”, exploit regulatory loopholes, allowing illicit actors to conceal the origins of ill-gotten funds.

The 131-year-old financial institution targeted unregulated P2P platforms and informal exchange networks, in particular, which circumvent traditional Know Your Customer (KYC) and Anti-Money Laundering (AML) protocols ) and end up creating avenues for illegal activities. These methods allow criminals to avoid the scrutiny of centralized financial intermediaries by leveraging the pseudonymity of blockchain transactions.

Regulatory gaps

The Bank of Italy report also highlighted the challenges posed by decentralized financial systems (DeFi) to combat money laundering. While centralized finance platforms (CeFi) can be regulated similarly to traditional financial institutions, their decentralized counterparts, on the other hand, operate without intermediaries, making supervision much more complex.

The pseudonymity inherent in blockchain technology allows users to engage in transactions using unlinked addresses, effectively hiding their identities. This has sparked a debate between those who praise the blockchain for its transparency and immutability and critics who highlight its potential for abuse.

The report points to emerging solutions such as zero-knowledge proofs (ZKP), which enable the selective disclosure of information to mitigate illicit activities without compromising user privacy. However, these innovations, while promising, do not provide the ongoing due diligence needed to systematically identify suspicious activity, according to the Bank of Italy.

SPECIAL OFFER (Sponsored) Binance Free $600 (Exclusive to CryptoPotato): Use this link to register a new account and receive an exclusive welcome offer of $600 to Binance (full details).

LIMITED OFFER for CryptoPotato readers on Bybit – Use this link to register and open a FREE $500 position with any currency!