According to Steven Mnuchin, U.S. Treasury Secretary, the G7’s Financial Action Task Force (FATF), an intergovernmental organization for combating money laundering will not allow crypto to become the next Swiss bank accounts, reports a media outlet on June 21, 2019.
Crypto Assets Will Not be Allowed to Become Swiss Bank Accounts
Per the report, Steven Mnuchin has outrightly stated that G7’s FATF will not allow crypto assets to become the next Swiss bank accounts. The latter are accounts operated in Switzerland and other offshore financial hubs. With these accounts, the identity of the owners is kept hidden and they are represented using code words.
On the other hand, Mnuchin revealed that he had gathered several bodies including the Federal Reserve to form a working group that will ensure that cryptocurrencies are not used for illegal activities. The U.S. Treasury Secretary also outlined that the FATF had adopted an interpretive note during the course of the week. The note demands that crypto exchanges, remittance, and payments firm implement anti-money laundering procedures.
According to Mnuchin:
“By adopting the standards and guidelines agreed to this week, the FATF will make sure that virtual asset service providers do not operate in the dark shadows. This will enable the emerging FinTech sector to stay one step ahead of rogue regimes and sympathizers of illicit causes searching for avenues to raise and transfer funds without detection.”
FATF Recommendations Requires Exchanges to Share Customer Data
It can be recalled that on June 21, 2019, the FATF released its final recommendations for its 32 member countries. The recommendations include a travel rule that requires exchanges to obtain, hold, and share customer information with each other. In this case, both transacting platforms will obtain the sender’s and receiver’s information such as name, physical address, date of birth, national identity number, amongst other things.
On the other hand, these standards or recommendations from the FATF come with several downsides for the cryptocurrency community. A number of people in the space have already pointed out that it will impact on user privacy and be counterproductive to law enforcement goals. Others have noted that it may be aimed in combating their use for financing illegal activities, but they may lead to the discontinuation of some platforms.
Possible Effects of New Recommendations on Crypto Exchanges
For starters, the operating cost of running a cryptocurrency-based business could increase due to the AML/KYC requirements. A business that intends to go through with it, will need to hire more workers to ensure that accurate customer information is obtained. In the same vein, this incurred cost could be passed on to users by an increment in fees and commission.
Another bone of contention is the move by exchanges to delist privacy coins in order to comply with these regulations. These coins bring about anonymity in transactions and as such, they will have no use in jurisdictions which exchanges have been blocked from offering them. Binance, for instance, recently announced that it will stop its U.S. customers from trading on Binance.com by September this year.
Bittrex to Block Certain Markets for U.S. Customers
Asides from Binance, Bittrex, a U.S. based crypto exchange announced on June 14, 2019, that certain crypto markets will be unavailable to U.S. customers. The block will be implemented on June 28, 2019 and it will affect 42 crypto coins including Power Ledger (POWR), OmiseGO (OMG), Aragon (ANT), Bloom (BLT), BnkToTheFuture (BFT), AdEx (ADX), BANKEX (BKX), Nxt (NXT), and Bancor (BNT).
Like virtual currency exchanges, Facebook is facing its own bone of contention after the U.S. House of Representatives Financial Services Committee asked it to halt the development of Libra, its cryptocurrency. On June 21, 2019, Coinnounce informed that a G7 taskforce has been created to examine the way central banks will ensure that Libra is regulated.