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On June 21, the Financial Action Task Force, a multinational task force charged with combating money laundering and financing of terrorism, will release a new note on how the participating countries should treat cryptocurrencies.
According to an email from FATF spokeswoman, Alexandra Wijmenga-Daniel, Bloomberg reported that the “new rules will apply to businesses working with tokens and cryptocurrencies, such as exchanges and custodians and crypto hedge funds”. The note’s recommendations are said to only be suggestions that will have to be interpreted by each country’s respective regulator. However, if a country chooses to not comply with the FAFT rules, the organization can blacklist a country and “it can essentially lose access to the global financial system”, according to Jesse Spiro, head of policy at crypto investigative firm Chainalysis Inc.
Eric Turner, director of research at crypto researcher Messari Inc told Bloomberg that “[t]heir recommendation could have a much larger impact than the SEC or any other regulator has had to date”. Bloomberg did report the value thresholds that the recommendations would apply to, which were previously released by the FATF.
“The guidelines will require companies ranging from exchanges Coinbase Inc. and Kraken to asset manager Fidelity Investments to collect information about customers initiating transactions of over $1,000 or 1,000 euros, as well as details about the recipients of the funds, and to send that data to the recipient’s service provider along with each transaction.”
Difficulties and unintended costs with compliance
These recommendations do require companies to jump through onerous loops to report information that cryptocurrency was never intended to reveal. Thus, the potential compliance cost could become astronomical. Mary Beth Buchanan, general counsel at San Francisco-based Kraken, talked about how the activities of the FATF is basically graphing old-world financial rules to a new era.
“Without enhanced technology systems, this is a case of trying to apply 20th-century rules to 21st-century technology. There’s not a technological solution that would allow us to fully comply. We are working with international exchanges to try to come up with a solution.
However, this increased regulation could actually backfire on the regulating parties by pushing consumers more towards decentralized exchanges to save money and preserve their privacy. Jeff Horowitz, chief compliance officer at San Francisco-based Coinbase, illustrated this point.
“I get why the FATF wants to do this. But applying bank regulations to this industry could drive more people to conduct person-to-person transactions, which would result in less transparency for law enforcement. The FATF really needs to consider the many unintended consequences of applying this specific rule to VASPs.”
Kraken has already noted the extreme cost of complying within the United States and why many exchanges currently do not service consumers based within the United States.
Dash provides options for users
Depending on how the final regulations pan out, consumers will be looking to move their money quickly and conveniently, but Dash has been working hard to achieve numerous exchange integrations. So even if compliance costs force numerous exchanges to shut down, Dash is still available on dozen of exchanges to maintain liquidity. Then Dash has also been working hard on decentralized exchange integrations so consumers can still trade and maintain their anonymity and privacy details.