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The world’s biggest cryptocurrency exchanges are aiming to join forces for the upcoming meeting with the financial leaders and regulators. The crypto community is looking to fight the new data gathering rules put forth by financial regulators in the currently ongoing G20 summit. The event is called the V20 summit and has been orchestrated to coincide with the G20 summit in Osaka on June 28 and 29.
Some big crypto players like Coinbase, bitFlyer, Circle, Kraken and Huobi are going to be a part of the event. Thrown together with a notice of just 6 weeks, the event seems like a knee jerk reaction to the expected proposals in the G20 summit regarding cryptocurrencies. The main purpose of the event is to debate a controversial proposal from the Financial Action Task Force (FATF) concerning crypto exchanges. The FATF is a inter-government body set up to combat money laundering and terror financing.
While most of the proposals by the FATF have been supported by almost everybody, one of the proposals has irked and even scared cryptocurrency exchanges. The proposed rule, if applied, would require global regulators to ensure that virtual asset service providers (i.e. exchanges), custodian banks, and any other type of institutions involved with cryptocurrency markets collect, hold and remit information on the counterparties to customers’ trades on their platforms. The exchanges and other crypto related institutions will also have to make this information available to their relevant law enforcement agencies.
The Unintended Consequences of the FATF Proposal about Crypto Exchanges
The argument against this proposal suggests that it could have unintended consequences. More scrutiny on transaction parties would encourage off-exchange trading, which paradoxically would end up making the jobs of law enforcement agencies even harder. It is next to impossible to track transactions and trading off-exchange.
However, there is an argument to be made in support of the proposal by the FAFT. Crypto exchanges have been known not to take enough precautionary measures to protect their funds and data until after it’s too late. The most recent example of this is from the cryptocurrency exchange Binance, one of the biggest cryptocurrency exchanges working today. In May 2019, Binance reported that hackers managed to steal some 7,000 BTC ($40 million) from their funds in a single transaction.
The V20 summit will allow all stakeholders to voice their concerns and come up with a regulation that suits the unique requirements of the crypto market. The aim is not to outright reject the proposals by the FAFT but to make sure that the new set of rules don’t end up hurting the crypto community and hindering innovation.