Clamping down on “cypto-based” money laundering
Bitcoins and other cryptocurrencies have attracted the interest of various kinds of people over the past few years — with market values making news-worthy gains every few weeks.
That’s a great thing for various stakeholders such as bankers and startups, but it has also created a problem for regulators who find that they don’t understand cryptocurrencies very well, don’t control (or even see) any of the transactions, and cannot expect people to disclose their holdings in crypto-wallets very easily.
Essentially, cryptocurrencies have become a digital safe haven for money launderers. It has compounded the problem for those fighting financial crime and put a new tool in the hands of terrorists looking to anonymously move money across the world without any consequences.
However, the Financial Action Task Force (FATF) has decided to lead and guide the industry through the chaos. It has recently announced that it will provide a new set of rules to regulators and bankers who seek to safeguard and secure the flow of money via cryptocurrencies.
This is deemed to be a major step towards creating international standards for an asset currently subject to patchy regulations — with the new rules expected to be published in June next year.
According to experts on the FATF and specialists in the industry, every regulator, in one way or another, will need to license or regulate cryptocurrency exchanges and firms providing encrypted wallets.
This will be the first and single most important step to help reduce the use of digital money for money laundering, terrorism financing, and other crimes.
Entities that provide the financial services necessary for the issuances of new cryptocurrencies via initial coin offerings (ICOs) will also need to be subject to new rules, ensuring that those now entering the market, raising funds, or operating a crypto-funded startup have legitimate business interests.
“How countries implement the rules will be subject to periodic reviews. Countries judged to be falling short could be added to a FATF blacklist that restricts access to the global financial system. By June, we will issue additional instructions on the standards and how we expect them to be enforced,” FATF President Marshall Billingslea told Reuters.
Truth be told, these regulations are coming at the right time. The cryptocurrency markets are growing so quickly, fuelling the rise of crypto-miners and backroom crypto deals on the deep web.
Introducing global regulations will definitely help check the ills of cryptocurrencies and channel its momentum into exciting avenues like central bank issued cryptocurrencies and other more economically beneficial projects — creating a better future for all stakeholders.