According to a report from Bloomberg earlier this week, the Financial Action Task Force (FATF), a committee that defines anti-money laundering and counter-terrorism financing (AML/CFT) rules for some 200 countries have set its eyes on the crypto industry.
To be clear, they’ve had an eye on it since the last couple of years but now appears ready to make a move that if successful, will take away the freedom crypto industry participants enjoy.
As per a statement from FATF spokeswoman Alexandra Wijmenga-Daniel, the body will reveal in its guidance note expected to go live on June 21, that cryptocurrency exchanges, hedge funds, and custodians must comply with more stringent requirements.
Specifically, these businesses must collect personal information about their customers and fund recipients if the transactions exceed $1000 or €1000. The initiating platform would then share collected data with the recipients’ for confirmation and verification of the transaction.
While it is clear that reaching such compliance would require a lot of effort from platforms facilitating crypto transactions, we would like to review how the new rules apply to every user of cryptocurrency.
What the Newly Proposed FATF Crypto Rules Mean For You.
As mentioned in the headline of this report, the newly proposed rules by the FATF practically imposes on crypto platforms the same requirements as banking corporations globally.
For this reason, you can expect that platforms who try to reach compliance with the rules will require that you complete a Know-Your-Customer Verification process before you can initiate transactions above $1000 or €1000.
Necessary KYC on most platforms requires that you provide a viable means of identification as well as recent images, as you would provide when opening an account with a local bank.
Also, you would have to provide data regarding who would receive the funds on the other end, effectively removing the pseudonymous feature that characterizes cryptocurrencies until now.
If you participate in ICOs, STOs or IEOs, then you can also expect that the same rules will apply before you can either buy tokens on an exchange or even transfer it directly to another user without going through the platform’s order book.
The simplest explanation would be that the newly proposed rules remove the promise of freedom that has attracted many to cryptocurrencies and could have critical implications on the growth of the industry.
Although regulators in different jurisdictions would retain the power to make some adjustments to the rules, likely, any significant deviation from the basic principles such as the $1000 threshold could result in such region being cut off from the global financial system.
What Other Options Exist?
As outlined by some crypto industry participants who spoke to Bloomberg, the new rules are in stark contrast to the principles of pseudonymity on which most blockchain systems are built.
Disrupting a disruptive technology such a blockchain would push the bad players and of course some good ones from using the regulated platforms.
Crypto users can transact directly with each other, further creating a rift between regulators catching up with them. That would mean that regulators would never fully achieve oversight of the entire crypto industry.
In the end, there will be winners and losers, although the biggest hope would be that the newly proposed regulations do not impede on the growth of the industry or push it into further obscurity.