Regulatory Trilemma in China: A Game-Theoretic Exploration of Anti-Money Laundering in the Digital Currency Sphere

Abstract

Digital currency is produced along with the development of Internet finance. Because of its virtuality, anonymity, low cost and so forth, it is easy to be used by criminals engaged in money laundering activities. Through the cases of money laundering of Q-coins and bitcoins, this paper discusses the causes of money laundering and points out that the four difficulties of the main content in the supervision of anti-money laundering of China’s Digital Currency. Through making use of the game theory to conduct the game analysis between China’s Digital Currency trading service agencies, this paper constructs the game model between China’s Digital Currency trading service agencies and money launderers, as well as the game model between China’s anti-money laundering supervision agencies and China’s Digital Currency trading service agencies, selects the anti-money laundering supervision strategy of China’s Digital Currency, and analyzes the question of its effectiveness. Finally, it concludes that in the anti-money laundering supervision of China’s Digital Currency, firstly, it is necessary to establish clear laws and regulations to solve the problem of the difficulties of anti-money laundering compliance and execution; and secondly, it is necessary to force customer identification to solve the problem of the difficulties of identification; and then it is necessary to improve the internal control system to solve the problem of the difficulties of investigation and evidence collection.