It seems regulators won’t let another crypto bull run start before they can implement stringent regulations about industry service providers.
At a recent convention the finance ministers and central bank governors of the members of the Group of 20 (G20) in Riyadh, Saudi Arabia, the authorities urged the implementation of Know Your Customer processes into the businesses of cryptocurrency service providers, echoing a similar attempt from the U.S. and other countries across the globe.
Crypto Service Providers Should Abide by FATF Guideline, Says G20
According to an official G20 communique outlining the going-ons of the event, the group’s authorities in finance want member nations to implement the standards mentioned in a crypto-centric guideline from the Financial Action Task Force (FATF), an intergovernmental organization combatting money laundering and other financial crimes:
Building on the 2019 Leaders’ Declaration, we urge countries to implement the recently adopted FATF standards on virtual assets and related providers.
It was added by the G20 ministers that as it stands, they remain worried about the rise of “so-called ‘global stablecoins’ and other similar arrangements that such risks need to be evaluated and appropriately addressed before they commence operation, and support the FSB’s efforts to develop regulatory recommendations with respect to these arrangements.”
For those that missed the memo, the FATF in June of last year released an extensive guideline on how countries and their respective service providers should treat cryptocurrency.
The most pertinent part of the guideline was the part in which the FATF asserted that all entities dealing with cryptocurrency should be actively collecting the customer information of those involved in transactions. The FATF advises the collection of data including the name of the transactor, their location, and the name of the beneficiary of the transaction.
This would likely be the most stringent rules placed upon the cryptocurrency industry yet should G20 and FATF member countries adopt the guideline and turn it into concrete law.
Global Concerted Effort
While this may be a coincidence, this communique comes as some of the world’s most powerful authorities have started to crack down on potential crime in crypto or have pledged to in the very near future.
The E.U. at the start of the year rolled out what is known as 5AMLD, a moniker that references it being the Fifth Anti-Money Laundering Directive of the European Union. Firms in the jurisdiction of the directive should respond to what was outlined in it in 2020.
The directive treats firms like crypto exchanges or custodial wallets just like financial institutions, meaning that industry service providers will need to be on the lookout for terrorist financing risk enabled by cryptocurrency and will need to increase information collection to mitigate other potential crimes.
The implementation of 5AMLD has already affected large crypto businesses such as Bitcoin derivatives platform Deribit, which was forced to move its headquarters and implement mandatory KYC, and social media payment upstart Bottle Pay, which had to shutter its business entirely.
Across the pond, the Internal Revenue Service of the United States is calling upon crypto companies and executives to convene at a March 3rd summit that will discuss how the tax agency can “balance taxpayer service with regulatory enforcement.”
Also, Steven Mnuchin, the Secretary of the U.S. Treasury, said in a hearing held by the Senate Finance Committee last week that the FinCEN branch of the Treasury will soon roll out “significant new requirements” for entities working with cryptocurrency.