New rules could come into force on June 21 that would do more to strip anonymity from crypto users than any so far introduced, yet it has gone relatively undocumented. The Financial Action Task Force on Money Laundering (FATF), a multi-government body that develops recommendations for fighting money laundering and financing of terrorism, has been working on ways to reduce the anonymous use of cryptocurrencies and has come up with a measure that will send a shiver down the spine of every business that deals with digital assets – they must verify the identities of anyone sending or receiving more than $1,000 worth of cryptocurrency.
The Hammer Finally Comes Down
The FATF began looking seriously at reigning in cryptocurrencies in July 2018 after the explosion in 2017 that garnered the world’s interest and put cryptocurrencies firmly on the financial map. Now, after twelve months of deliberations on how to best police this new asset, they have come up with tough new rules that will be followed by the almost 200 countries that follow the FATF protocols. In eight days the body will outline how they expect crypto-handling businesses to comply with the rules, which have the potential to be so burdensome that they could drive smaller businesses out of the crypto arena altogether. The G20 countries have frequently stated their desire to regulate cryptocurrencies, stating last month that they would align with whatever standards the FATF recommends, meaning that the operating practices of thousands of crypto-related businesses will be affected around the world.
A Difficult Task
Similar rules have governed wire transfers for decades, but few in the crypto industry would have predicted that such a low limit would have been set in place for digital assets. The new guidelines will require any company that sends and receives cryptocurrency to collect details about customers initiating transactions of over a thousand dollars or euros and their recipients, and to send that data to the recipient’s service provider. This may sound simple in principle, but given that cryptocurrencies are sent to anonymous addresses rather than identity-confirmed bank accounts, obtaining information on the recipient’s details is going to be next to impossible for every transaction.
As John Roth, chief compliance and ethics officer CEO of Bittrex, 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. You can imagine difficulties in trying to build something like that.
Crypto exchanges worldwide are therefore probably holding their breath as they await next week’s announcement from the FATF, knowing the news will not ultimately be good for them or their customers.