FATF (Financial Action Task Force), an intergovernmental organization whose role is to combat money laundering and terrorism financing has presented their recommendations on regulating cryptocurrencies for its 37 member countries.
However, the FATF standards released Friday includes a very controversial requirement that “virtual asset service providers” (VASPs) along with crypto exchanges should now pass information about their users to one another when transferring funds between firms.
Their final recommendation asks countries to make sure that when crypto businesses send money, they:
“obtain and hold required and accurate originator [sender] information and required beneficiary [receipient] information and submit the information to beneficiary institutions … if any. Further, countries should ensure that the beneficiary institution… obtain and hold required (not necessarily accurate) originator information and required and accurate beneficiary information”
They have also added a list of required information for each transfer. This includes the sender’s name, their account number, physical address along with beneficiary name and beneficiary account number.
Based on their public statement, the FATF have given the countries 12 months to adopt their guidelines.
Now, these regulations might help control illegal activities however they are completely against user piracy and will be against the concepts that blockchain and cryptocurrency are trying to establish as a practical use case.
Other Recommendations
“In cases where the VASP is a natural person, it should be required to be licensed or registered in the jurisdiction where its place of business is located—the determination of which may include several factors for consideration by countries,” the document added.
Now according to the FATF, individuals that use crypto to buy goods or services are not to be considered as VASP’s. Other than this the document states the following:
“Competent authorities should take the necessary legal or regulatory measures to prevent criminals or their associates from holding, or being the beneficial owner of, a significant or controlling interest, or holding a management function in, a VASP
Such measures should include requiring VASPs to seek authorities’ prior approval for substantive changes in shareholders, business operations, and structures.
If the VASP cannot manage and mitigate the risks posed by engaging in such activities, then the VASP should not be permitted to engage in such activities”
FATF suggests that countries should open-source information and web-scraping tools to detect unregistered or unlicensed operations to regulate the malpractices of their services.
What this means for the industry
Data analytics company Chainalysis along with several others are disappointed with the current set of regulations and states that it is a step backward and suggests that the focus should be on increasing transparency. FATF, led by the United States ignored all of this along with the suggestions and concerns from a private-sector consultation meeting in Vienna last month, that drew 300 attendees.
Steven Mnuchin, The U.S. Treasury Secretary said the following in a FATF plenary session held in Orlando, Florida on Friday:
“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,”.
He also added that this would help the financial technology sector “stay one step ahead of rogue regimes and sympathizers of illicit causes,”
“We will not allow cryptocurrency to become the equivalent of secret numbered accounts [and] we will allow for proper use, but we will not tolerate the continued use for illicit activities.”
It is clear that the FATF Guidelines are a step towards generalizing crypto regulations globally. This is something that has been pushed several times by the European Union and the United States. These attempts are mainly to counter money laundering and because of the lack of understanding of Cryptocurrencies and their potential when used in ways they are meant to be used. This is definitely a step back for the Crypto industry that has pushed user privacy as the pivotal point of its existence.
It’ll be interesting to see how the countries react to these new FATF rules.
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