Centralised Control Over Decentralised Structures: AML and CTF Regulation of Blockchains and Distributed Ledgers

Proponents of bitcoin have long asserted transnational decentralised structures cannot be regulated by centralised state-based actors. The recent legislative activities of dominant financial jurisdictions, premised on the standards articulated by the Financial Action Task Force, negates this assertion. Regulators have chosen to impose old rules on new business structures, ensuring the dominance of traditional financial surveillance to meet AML and CTF compliance. With recognition that governments can regulate distributed ledger technology, and that analogous behaviour in the cryptocurrency space will be treated similarly to already regulated activities, the discussion needs to shift to the efficacy of using centralised methods in decentralised spaces. There is no disagreement as to the importance of stopping money laundering, the financing of terrorism, or the proliferation of weapons; the question is rather if these goals can be achieved with a new balance between the competing interests of privacy and surveillance, while facilitating the nascent promises of new technologies.