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The G20’s Financial Action Task Force (FATF) is a powerful intergovernmental organization devoted to combating money laundering and terrorism financing. Recently, it released global standards for cryptocurrencies to better regulate the sector and thwart money laundering operations. The new standards introduced by the organization are supposed to help cryptocurrencies and crypto exchanges fight illegal activities carried out through them, although not everyone is happy about these new rigid standards.
U.S. Treasury Secretary Steven Mnuchin offered final remarks to the FATF plenary session held Friday in Orlando, Florida. He encouraged the attendees of the session to “work together to ensure that virtual assets are no longer a safe haven for illicit actors to end-run around established AML/CFT safeguards.”
Mnuchin explained that cryptocurrencies have long been accused of being a safe medium for money laundering as regulators across the globe have been trying to bring these digital assets under their control. However, due to the complex and abstract nature of the technology, defining fair and inclusive standards has proven difficult so far. Yet, the FATF is uniquely equipped to take on this challenge since their sole purpose is to combat money laundering and terrorism financing.
Mnuchin praised the new regulations, saying:
“By issuing updated guidance, the FATF is enhancing financial transparency and setting expectations. This will enforce a level playing field for virtual asset service providers, including cryptocurrency providers, and traditional financial institutions.”
He stressed that cryptocurrency will not be allowed to become the equivalent of secret numbered accounts. While “proper use” will be allowed, use for illicit activities will not be tolerated. He also announced the formation of a group with the Federal Reserve and other regulators to “make sure we keep the use of digital assets for legitimate use only.”
Controversial Demand from Crypto Exchanges
The FATF standards include a controversial requirement that “virtual asset service providers” (VASPs), including crypto exchanges, pass information about their customers to one another when transferring funds between firms. At its core, the contentious part of the FATF’s new standards would require crypto businesses to “obtain and hold required and accurate originator [sender] information and required beneficiary [recipient] information” and share that information with regulatory institutions where applied.
One of the major selling points of blockchain and cryptocurrencies has always been the anonymity it provides to all parties. This function of the technology that is there by design is under threat from the new regulations. Will the crypto sector succeed in resisting the harsh regulatory recommendations or will they bend to the will of the FATF? Only time will tell.