Financial Action Task Force [FATF] may be the cryptocurrency industry’s biggest challenge yet

  • 12 June 2019, Wednesday, 06:40
Financial Action Task Force [FATF] may be the cryptocurrency industry’s biggest challenge yet
Source: Unsplash

Regulation for the better part of a decade, has been at loggerheads with the cryptocurrency industry. From being exhibited at the world stage as a rebellious, government-shunning decentralized currency to proponents of the industry voicing their support for “necessary regulation,” financial watchdogs are key players within the industry.

According to a report by Bloomberg, the Financial Action Task Force, a body constituted by representatives from various governments curated to countering money laundering and financing of terror outfits, will restate and may revise its stance on virtual assets. The FATF will include over 30 member countries, including the United States, China, India, and the European Commission

Alexandra Wijmenga-Daniel, a representative of the FATF, told Bloomberg that any stakeholder within the cryptocurrency space, be it token issuers, exchanges, custodians or hedge funds, will be subject to the changed rules.

Calling this imminent global regulatory hit a “much larger impact than the SEC or any other regulator has had to date,” Eric Turner of Messari Crypto highlighted the importance of the FATF’s decision. Domestic regulators will have their own interpretations o the same, especially with respect to “wire transfers” and other country-to-country differing prospects.

Exchanges like Binance, Kraken and Coinbase, as well as newbies such as Fidelity Digital Assets will have to submit information about customers transacting over $1,000 or €1,000. Additionally, data about the recipient of the funds and the date of the transaction will have to be sent to the “service provider” for each transaction.

One of the core precepts of the cryptocurrency industry is the maintenance of a high degree of anonymity. If the other party’s details have to be submitted, not only is it a tedious task, but it also defeats the purpose.

Bittrex’s John Roth told Bloomberg,

“It’s either going to require a complete and fundamental restructuring of blockchain technology, or it’s going to require a global parallel system to be sort of constructed among the 200 or so exchanges in the world”

With the onset of this kind of stringent regulatory oversight, cryptocurrency exchanges are fearing that compliance costs will skyrocket. Further, countries with strong foundational regulations will bear the brunt of the FATF effect, with customers leaving and exchanges being made futile as traders will trade with each other, without an intermediary.

Some see it as a net-negative for the cryptocurrency industry as the absence of a formal trustworthy exchange would lead to a decline in transparency and problems with liquidity as well. Coinbase’s Jeff Horowitz stated that the FAFT will need to consider the “unintended consequences” of the enforcement.

Cryptocurrency friendly countries will also face a tough ordeal if they do not comply with FATF norms. The report added that such violator countries will be placed on a “blacklist.”

Regulation is a requirement for many, if the cryptocurrency world wants to break into the mainstream financial world. But, this regulation will curtail more and streamline less. Hence the old adage, how much regulation is too much regulation?