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New Regulations Threatening the Cryptocurrency Market

Bitcoin and other cryptocurrencies have functioned in a wild west economy, with little government control compared to established financial institutions. However, according to a recent Bloomberg study, the extremely volatile business may now be facing its biggest challenge yet.

On June 21, an intergovernmental agency is anticipated to release rules that might create trading delays as well as significantly increase fees for crypto exchanges and around 500 crypto funds. According to Eric Turner, director of research at crypto research firm Messari Inc, the new rules represent “one of the biggest risks to crypto today.” “Their advice has the potential to have a far greater influence than the SEC or any other regulator has had to date,” he continued.


New rules lay out how the government should regulate cryptocurrency companies.
Exchanges, custodians, and crypto hedge funds are among the entities that will be affected.
Companies should be required to collect information on customers who make purchases worth more than $1,000 or 1,000 euros.
Transaction times, expenses, and the number of peer-to-peer transactions could all increase dramatically.

Bloomberg was used as the source.

According to Bloomberg, the Financial Action Task Force is a multi-government initiative that creates proposals to combat money laundering and terrorist financing. According to FATF spokeswoman Alexandra Wigmenga-Daniel, the group, which has 38 members including the United States and is followed by over 200 countries, is planning to offer cryptocurrency rules for each country to execute on its own. The group will lay out how countries should regulate companies that engage with tokens and cryptocurrencies, such as exchanges, custodians, and crypto hedge funds.

Regulating is seen as a significant burden.
According to the new FATF standards, all businesses must collect information on consumers who initiate transactions worth more than $1,000 or 1,000 euros, as well as information on the funds’ beneficiaries. After that, the recipient’s service provider must receive this information. While this may appear to be a straightforward operation at first glance, it may prove to be incredibly time consuming and inefficient.

According to Bloomberg, this new duty entails determining the recipient of payments in a sector where most wallet addresses on cryptocurrency-supporting digital ledgers are anonymous.

The new legislation has a pessimistic view, according to John Roth, chief compliance officer at Bittrex, a crypto exchange with a daily trading volume of $58 million. “Either a comprehensive and fundamental restructure of blockchain technology is required, or a global parallel system will have to be built among the 200 or so exchanges across the world,” he told Bloomberg. “It’s easy to understand the challenges of constructing something like that.”

There are a few of U.S. exchanges attempting to develop such a system, according to Mary Beth Buchanan, general counsel at Silicon Valley-based Kraken, which has $195 million in daily trading activity.

“This is an example of trying to apply 20th-century principles to 21st-century technology,” Buchanan told Bloomberg. “Technologically, there isn’t a way for us to fully comply.” We’re trying to come up with a solution through international interactions.”

For merchants looking to protect their anonymity, such a system might lead to an increase in person-to-person transactions. In this way, enforcing bank regulations in the crypto world would give law enforcement less transparency.

“The FATF really needs to consider the potential unintended effects of applying this specific regulation to virtual-asset service providers,” Jeff Horowitz, Chief Compliance Officer at popular crypto-exchange Coinbase, told Bloomberg, adding that he knows “why FATF wants to do this.”

Ahead of Time

Much still depends on how country-specific authorities interpret and apply the FATF standards. According to the news source, organizations like the Financial Industry Regulation Authority (FINRA) are likely to step up enforcement, and state agencies may follow suit.

According to Jesse Spiro, head of policy at crypto investigative firm Chainalysis Inc., if a country does not comply with the new standards, it will be placed on a blacklist and face “basically losing access to the global financial system.”

What do you think?

Written by Trevanna Gordon

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