Examining and studying the requirements associated with scaling Bitcoin

Implementing (AML) controls in a blockchain-based system like Bitcoin to improve traceability is a complex task that involves several issues and challenges (Hassan et al. , 2019). Some of the key issues associated with such implementations include the following: Blockchain systems, including Bitcoin, often provide a level of pseudonymity, where users are identified by cryptographic addresses instead of their real-world identities.

While such pseudonymity offers , it can also pose challenges in implementing AML controls. For example, linking specific transactions to real-world entities becomes difficult, making tracing illicit activities and identifying money laundering patterns challenging (De Filippi, 2016). : Blockchain networks operate in a , where no central authority has full control.

This decentralized nature can create hurdles in implementing AML controls effectively. Decision-making processes, regulatory compliance, and enforcement become more complex in the absence of a centralized governing body or regulatory framework (Laroiya et al. , 2020).

Blockchain technology is still relatively new, and there is a lack of standardized AML frameworks specifically tailored for blockchain-based systems (König et al. , 2020). Traditional AML frameworks may not fully align with the unique characteristics of blockchain networks, requiring the development of new approaches and regulatory guidelines (Al-Tawil, 2022).

: Blockchain systems enable , allowing users to transfer funds across jurisdictions easily (Omarova, 2020). Yet, such capability poses challenges regarding international cooperation and the harmonization of AML regulations. Countries have varying AML requirements, making ensuring consistent compliance and traceability in cross-border transactions difficult (Muirhead & Porter, 2019).

: Blockchain systems, particularly public and permissionless networks, face technical limitations when it comes to scalability and transaction speed because of imposed conditions. Implementing robust AML controls requires processing many transactions quickly and efficiently, which can be challenging in the context of a blockchain’s artificially enforced scalability constraints (Taherdoost, 2023). : Blockchain technology emphasizes transparency by making transaction data publicly accessible.

Yet, AML controls often involve sensitive information and confidentiality requirements. Striking a balance between the need for transparency in traceability and maintaining confidentiality for certain aspects of AML investigations can be a complex task (Pocher & Veneris, 2022). Addressing such issues requires collaboration among regulators, blockchain developers, and industry stakeholders, to develop innovative solutions and establish regulatory frameworks specific to blockchain-based systems.

In addition, it is essential to balance enhancing traceability and privacy, ensuring cross-border cooperation, and adapting AML controls to the unique networks. Al-Tawil, T. N.

(2022). Anti-money laundering regulation of cryptocurrency: UAE and global approaches. , (ahead-of-print).

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, Rehmani, M. H. , & Chen, J.

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, & Kieseberg, P. (2020). Comparing Blockchain Standards and Recommendations.

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, & Komalavalli, C. (2020). Chapter 9—Applications of Blockchain Technology.

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Omarova, S. T. (2020).

Technology v Technocracy: Fintech as a Regulatory Challenge. , (1), 75–124. Pocher, N.

, & Veneris, A. (2022). Privacy and Transparency in CBDCs: A Regulation-by-Design AML/CFT Scheme.

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Smart Contracts in Blockchain Technology: A Critical Review. , (2), 117. Watch: The Bitcoin Masterclasses #1 Day 1 with Craig Wright: Confidentiality, Privacy, Anonymity, Party to Party.