There has been no progress regarding the enforcement of cryptocurrency exchanges and other services for a year. The FATF calls for a focus on regulation rather than the mass adoption of crypto assets.
The Financial Action Task Force (FATF) recently discussed standardized rules on cryptocurrencies and service providers related to those assets. The intergovernmental organization determined that only 45% of the 128 countries under its supervision are applying them.
Its annual report indicates that the lack of an effective regulation makes it difficult to keep track of transactions with cryptocurrencies. That seems to be clearing the way for criminals to move the pieces in their favor, said the FATF.
The policy-making body states that only 52 countries supervise all the cryptocurrency providers operating in their territories. However, the number rises to 58 when including the six that have banned the use of crypto assets.
A year ago, 54 of the FATF member countries applied regulations on cryptocurrencies, which shows practically no progress. The report states that the agency has been unable to increase enforcement of its rules against money laundering and terrorist financing.
The FATF has focused on auditing cryptocurrency-related services for the past two years. However, they have failed to demonstrate whether their regulations are adequate for an ecosystem characterized by user privacy.
This intergovernmental group aims to fight the laundering of money and the financing of terrorism worldwide. They say that they expect most of their member countries to implement the regulations to track cryptocurrency transactions.
The FATF recommends applying the so-called travel rule, which requires exchanges to share information about users whose transactions exceed USD 1,000. The agency seeks that service providers in the cryptocurrency sector know the origin and destination of those transactions.
Although Users Want Privacy, the FATF Recommends Watching Bitcoin
The agency also asks to ensure that cryptocurrency service providers will obtain and keep all the information about their users.
They also note that they have observed an increasing use of anonymity tactics within the cryptocurrency industry. They add that the use of Bitcoin and other cryptocurrencies has skyrocketed since the lockdown to protect against COVID-19 began. For that reason, the FATF researchers believe that it is more convenient to understand the situation better than focus on mass adoption.
The FATF expects all its members to apply the regulatory guidance on cryptocurrency service providers to sanction those who do not comply with it.
The group recently decided to postpone its new regulation on Bitcoin, DeFi, and other related services.
Peter Van Valkenburgh, Research Director at the Coin Center, defends user rights over open blockchain networks. He stated that the FATF has been considering changes problematic for the innovation as they violate the privacy of Bitcoin users.
The growing relevance of cryptocurrencies in the world economy has led many governments and regulators to have them in their sights. As they believe that crypto assets are directly related to illicit activities, they have created regulations to control or ban them.
By Alexander Salazar
