Financial Crime World

Countries with High Corruption Levels Promote Cryptocurrencies for Business and Money Laundering

Several countries plagued by high levels of corruption are leveraging cryptocurrencies like Bitcoin as a means to attract business and facilitate illicit financial transactions, often without adequate regulation or oversight. This article examines two such countries: El Salvador and Paraguay.

El Salvador

In September 2021, President Nayib Bukele made El Salvador the first country in the world to declare Bitcoin legal tender, sparking intense debate about corruption within his administration. The World Bank has since withheld loans from the country due to concerns over government corruption.

Key Points

  • Bitcoin adoption: El Salvador’s decision was met with criticism due to concerns about corruption within the administration.
  • Corruption concerns: The World Bank has withheld loans from El Salvador due to government corruption.
  • MS-13 gangs: MS-13 gangs are increasingly using Bitcoin, which is easy to use and convert.

Paraguay

Paraguay appears to be following El Salvador’s blueprint for promoting cryptocurrency business. Former president Horacio Cartes, who retains significant economic and political influence, has been designated as a “corrupt actor” by the US government.

Key Points

  • Cryptocurrency promotion: Paraguay is moving to follow El Salvador’s blueprint for promoting cryptocurrency business.
  • Cartes’ conglomerate: The country’s largest business conglomerate, owned by Cartes, includes banks, hotels, media organizations, and cigarette factories.
  • Renewable energy advantage: Paraguay’s competitive advantage for Bitcoin mining is its reliance on renewable energy (hydroelectric power).

Recommendations

The United States can take steps to slow the trend of transnational organized crime groups using cryptocurrencies. These steps include:

  • Implementing basic KYC regulation and transparency in jurisdictions promoting cryptocurrency use comparable to those in the formal banking structure.
  • Refusing to recognize citizenship documents based on cryptocurrency investments that likely incentivize fleeing justice in other jurisdictions.
  • Helping regional institutions establish common crypto guidelines and regulations across the hemisphere.