Is It Possible for Financial Institutions to Implement Virtual Currencies?


There are a lot of questions from financial institutions on whether or not its safe to offer virtual currencies into their offerings. Financial institutions that are considering the acceptance of virtual currencies, such as Bitcoin, and possibly integrating them into their offerings need to keep track of the latest developments and be aware of key risks, including potential use of the currencies for money-laundering schemes. Identity verification and authentication is hard to perform on virtual currencies due to the demand of anonymity.

Eventually, if banks decide to accept virtual currencies they will need to develop payments strategies and tactics, even if the security risks are not yet fully understood. It will also be important for banks to determine the current value of virtual currencies, which is challenging because their value is fluid. The fluidity in value will certainly raise even more questions around money-laundering risks.

Financial institutions need to consider the fact that virtual currencies can be stolen, and investors have to rely upon the strength of their own security systems, as well as third party fraud prevention solutions, to protect them from fraudulent activity. Not to mention, on many virtual currency ATMs they ask for a large amount of personal information, which is especially troubling. Deciding what exactly the ATM will store, including personal information and palm print, needs to be determined across the board. If compromised, customers could lose their phone number, email, palm print and all the data from their government issued ID, which puts the institution at risk as well.

As banking regulators around the world begin to move toward regulating virtual currencies, including verifying the identities of customers, some Bitcoin proponents are working harder to make sure users remain anonymous. The further encryption of virtual currencies could make it more difficult to trace the flow of money online, which could help bolster criminal activity.

[Contributed by EVS Marketing]