Will tougher regulations for cryptocurrency exchanges stifle the essence of the industry bringing AML data checks for every deposit?
Regulation in the cryptocurrency industry has always been a contentious topic. On one hand we pride ourselves as Bitcoin enthusiasts, for being decentralized and sovereign owners of our own economic future, without any control by any nation or law. And particularly not under the control of any banks. We are our own broker and banker when we own our own private keys to our wallets full of crytpo.
And yet at the same time we find the cryptocurrency industry to be something like the Wild West, in that without oversight we are all open to scams and fraudulent activity all about us, from hackers to scammers to ponzi schemes and con men of all sorts. And so we could sometimes do with a little protection via regulation.
But how much regulation is enough and how much is too much? We may be about to find out as the most concerning of advancements in the field of reglation is on the horizon. It appears as if the Financial Action Task Force (FATF) is ready to finalize new international standards which will force crypto exchanges, wallet providers and others to abide by what is known as the "travel rule", something banks are obliged to follow in order to be allowed to do business.
This sounds like a death knell to the integrity of crytpocurrencies as being private, or to some degree anonymous. It might just make crypto unworkable, according to some. Although these proposed standards, which are an expansion of the "Know Your Customer" (KYC) requirements, are not legally binding, but more like recommendations or "guidelines", as Jack Sparrow likes to call them in the Pirates of the Caribbean, nevertheless, peer pressure will end up obliging countries to comply, lest they be ostracized from the rest of the community.
We may need to brace for the impact of what looks like the most significant international regulatory standards yet. This proposed regulation will go beyond the current KYC that we are sometimes obliged to comply with when signing up to crypto exchanges. We provide proof of ID, proof of residence and sometimes even proof of existence, by sending in a photo of ourselves holding up a sign with today's date and the name of the company we are signing up for. I remember doing this a few times already to qualify for use of the exchange or project I was interested in.
Now it looks like exchanges and wallet providers will have to pass customer information on to each other – our information about ourselves. This is going to make exchanges look just like banks in the traditional financial sector – the very thing crypto is supposed to be moving away from. In other words it looks like the PTB or the government will be able to monitor and track all our financial transactions from one wallet to another, or from one exchange to another.
Members of the blockchain industry have already said that this will make crypto unworkable and will possibly drive away any newcomers too. It looks like a major step backwards for the cryptocurrency industry if it comes into play. Crypto enthusiasts have already made a last ditch effort to persuade the intergovernmental FATF to reconsider their regulations, as between 200 to 300 leaders from top exchanges, as well as Bitcoin brokers attended a consultative meeting in Austria earlier this month to voice their concerns.
The US just happens to be the head of FATF this year, on a rotational basis, and they want to get this law into place so that they can prevent the funding of terrorism via crypto transactions which may be untraceable for those who really want them to be. The US Treasury Undersecretary for Terrorism and Financial Intelligence (quite a mouthful) even gave a speech at the annual Consensus conference a few days ago.
It look like this could all be implemented some time in the next month. It's ironic that the US, who fund and sponsor terrorists like Al Qaida and ISIS as well as the Taliban in Afghanistan, actually want to put this obstacle in place to prevent terrorist funding. I guess it depends on which terrorists. The US are in effect actually sponsoring the very people that they are fighting against in a senseless war created by themselves to keep their war machine going, their military industrial complex, that makes them billions of dollars in profit on the murder of civilians in countries like Yemen, Syria, Iraq and Libya to name a few.
Such hypocrisy and moral bankruptcy is a sure sign of a decaying empire, as we see in the US today. One law for themselves and another for the rest of the world. They can fund whichever terrorist organization they want, but we are obliged to reveal our every financial move. I guess it makes sense, stifle the competition, except that you and I are getting caught in the middle of it all and our freedoms and crypto sovereignty that was handed to us by Satoshi Nakamoto when he gave us the open source code of Bitcoin, are being removed.
“We anticipate that in June the FATF will adopt a final version of its Interpretative Note, along with updated guidance to further assist countries and industry with their obligations.”
Sigal Mandelker, U.S. Treasury’s Under Secretary for Terrorism and Financial Intelligence at Consensus
The FATF who are proposing to implement these heavy regulations on crypto industries was originally founded by the G7 countries to combat money laundering and terrorist financing, and this move to regulate exchanges and wallets is a further step in that direction, so was in one sense inevitable. Crypto appeals to criminals just as much as it does to users like us, particularly the anonymous side of it, and the borderless capabilities. We give these crypto companies our private data in order to comply with regulation but now that data is going to be shared as it follows our every transaction of crypto from one wallet to the next on whichever exchange or even private wallet it occurs.
This is founded on the "travel rule" in finance but that rule was written when finance was always sent through an intermediary, like the bank. Nowadays we use the blockchain to engage in direct peer-to-peer transactions, so it's a new era and a new industry yet these old laws are going to effectively shift the crypto industry back into a previous era, where red tape and paper work can so easily clog up the system.
And it won't really help the PTB very much because it is still so easy to circumvent their attempts at following the money. One simply has to send the crypto funds to a non-custodial wallet, and then from there to another exchange or wallet and none of the exchanges involved would be able to track the movement directly. The law enforcement agencies simply can't control or regulate or monitor every transaction from start to finish. However, in trying, they will make it harder for the rest of us.
There may be some time delay until the regulation really comes into effect, if at all, and that could be months or even years, although they say next month already, so we will have to watch and see what happens to the system on the ground for the regular user like ourselves. This could get messy or complicated for users of Monero XMR for example, the most rugged privacy coin, along with others in the crypto sector.
And it will be quite a burden for exchanges to comply with all this data-capturing and monitoring of customers, as well as be an inconvenience to traders who are already reluctant to supply so much of their personal data to anyone. Who knows where that data could end up. Your ID document, number, address, bank account and such information is all now hackable as it moves around following your transactions. I wonder what Satoshi Nakamoto would have to say about this? What do you think the effect will be on the crypto industry if these tighter regulations come into effect? Is more regulation a good thing for the industry? Let us know in the comments below.
I don't have much idea about any of it for when I think I do then things change and I have to re evaluate what I know