CAI0074

Anonymous written evidence submission

What opportunities and risks would the introduction of a Bank of England Digital Currency bring?

1. It would be necessary for law enforcement to have access to Bank of England data (in relation to the Digital Currency) for law enforcement purposes. Crypto assets moving through the blockchain are more difficult and costly to track than fiat currency moving through banks; it would be necessary for the Bank of England to support law enforcement in that tracking in the same way that a bank would following receipt of a production order (Part 8 POCA 2002). Ideally, there would be a means for law enforcement to interrogate and evidence data built in to the digital currency.

Are the Government and regulators suitably equipped to grasp the opportunities presented by crypto-assets, whilst at the same time mitigating against the risks?

2. Understanding the movement and ownership of crypto assets requires access to a blockchain explorer. Use of reliable blockchain explorer services is costly and places too much reliance on private sector firms.

What opportunities and risks could the use of crypto-assets—including Non-Fungible Tokens —pose for individuals, the economy, and the workings of both the public and private sectors

3. Although predominantly utilised for legitimate purposes, cryptoassets used for illicit purposes are now well-established and growing across all Serious and organised crime threats. In particular, such actors have identified opportunities including money laundering, sanctions evasion, purchase of criminal goods, fraud and payments in response to a ransomware attack.
4. Cryptoassets are the most commonly reported technological enabler of economic crime. They provide a near-instant and pseudonymous way to make significant transfers of value across borders, at times with limited or no Know Your Customer (KYC) or Anti-Money Laundering controls. This can directly impact individuals in the UK who are exploited by criminals using Crypto Assets, such as through Ransomware or fraud. 
5. It is assessed that over a billion pounds is laundered every year through cryptoassets. This activity cuts across both High End Money Laundering and cash based money laundering, through a wide range of laundering mechanisms including use of Cryptoasset ATMs and Over-The-Counter brokers embedded within some exchanges. This activity damages the UK economy through reputation and movement of significant funds out of the UK.

October 2022