U.S. regulatory action alone will not be sufficient to suppress the money laundering threat posed by digital currencies.

Even if clear and consistent regulatory measures are imposed, digital currency services established in foreign and offshore jurisdictions—which are not subject to the Bank Secrecy Act (BSA)—can be used to conduct transactions in the United States. Limited international oversight of this expanding financial service is possible through a recommendation of the Financial Action Task Force on Money Laundering (FATF).The FATF has publicly stated the need to monitor the growth of this industry and implement anti-money laundering controls; however, FATF recommendations will have little effect on nonmember countries. It would be nearly impossible to legislate regulatory controls that would allow the U.S. government to prevent completely foreign-based digital currencies from being used in the United States, because these services are available through the Internet.

U.S. Department of Justice
National Drug Intelligence Center
Product No. 2008-R0709-003
June 2008