The FATF has just implemented a set of recommendations for Latin American exchanges. Several countries in the region belong to a regional branch of the FATF

The recommendations issued by the Financial Action Task Force (FATF) regarding the exchange houses and other cryptocurrency service providers must also be adopted in Latin America. This is clear from the available information about the active members of the association, which is contained in their official Website.

The FATF has just formalized a set of recommendations through which it guides countries on how to regulate cryptocurrency exchange houses, in an effort to prevent money laundering and terrorist financing. These rules proved to be controversial, since they are based on applying to the cryptocurrency industry regulations of the banking system, some of which would be detrimental to the sector.

Despite the fact that only four Spanish-speaking countries are among the 38 active members of the organization, namely Argentina, Brazil, Mexico and Spain, the FATF has subsidiaries worldwide. In Latin America, the Financial Action Task Force for Latin America (GAFILAT), which has been affiliated to the FATF since 2006, includes 17 of the countries in the region. This implies that Latin American cryptocurrency service providers will be affected by the regulations.

It should be noted that only Venezuela, El Salvador and Belize are not members of the GAFILAT. However, there is another regional group, a sister organization of the FATF, in the Caribbean area. This is the Financial Action Task Force of the Caribbean (CFATF), which brings together the countries of that region (25 members), also covering Venezuela, El Salvador and Belize.

Harmful Norms

The FATF explains that one of their requirements is related to the exchange of users’ information with third parties, which worries cryptocurrency exchange houses most. It was informed that KYC (Know Your Customer) regulations are transformed into a system for sharing user identification data along with transactions, both among users and among service providers.

The said rule, which is known in the banking sector as a “travel rule”, requires that the issuer of a transaction include data such as the name and physical address of the user that originates the transaction. Additionally, the FATF guide deals with cryptocurrency services focusing on privacy, and requests countries to ensure that these providers adapt to the regulations. It even indicates that they should be able to freeze or prohibit transactions with sanctioned individuals.

Suppliers of these services have expressed the view that the regulations, as presented by the FATF, will be detrimental to the operation of cryptocurrency exchange houses. Most opinions agree that applying them could lead to the closing of operations of many cryptocurrency management companies.

For the time being, although the FATF recommendations are not binding, all Latin American countries must ensure that its regulations regarding cryptocurrency exchange houses are adapted. They should comply with this if they do not want to be placed on a blacklist of countries that may endanger foreign investment.

All cryptocurrency investors should be able to count on a competent body like the FATF that protects both their privacy and their assets.

By Willmen Blanco


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