Virtual Asset Service Providers (VASP) should not apply to new requirements. The current regulations would already be a proven framework to combat money laundering.
International law firm Perkins Coie recently released a report that focuses on Monero (XMR), Zcash, Grin, and Dash. In the document, they state that the current regulations are enough to control possible money laundering with privacy-oriented cryptocurrencies.
The lawyers emphasize in the report, titled “Anti money laundering (AML) regulation on cryptocurrencies that allow privacy”, that the scrutiny should not focus on these cryptocurrencies. They believe that it should rather target virtual asset service providers (VASP) since these are the ones that must comply with regulations.
The analysts believe that current AML regulations cover risks “adequately and sufficiently,” creating an effective framework to combat money laundering and related crimes. Furthermore, they stressed that on-chain surveillance is not necessary.
In this regard, the report highlighted that, when these surveillance instruments are not on the chain, regulated companies may continue to “comply with their regulatory obligations through other means of information exchange off the chain.”
The lawyers’ discussions revolved around the user’s right to privacy, which is irrelevant or meaningless in other areas of traditional finance.
Privacy, Monero, and Money Laundering
The authors of the report acknowledge that it is possible to use this type of cryptocurrency for money laundering. However, they emphasize that virtual asset service providers (VASP) do not need to add new requirements for their control.
“Although the risks of money laundering with privacy-oriented currencies are real, they do not require specific and customized regulations that imply an unnecessary risk that would stifle the growth of privacy-oriented cryptocurrencies,” the report concludes.
The lawyers argue that private cryptocurrencies do not pose an inherent risk for money laundering. They explain that its possible use for this purpose is not greater than that of other products, which the operators themselves have supported in the past.
“There is no reason to impose new and excessive AML requirements that specifically target privacy currencies,” the analysts noted.
They advise providers of this type of services, such as exchanges and P2P platforms, to strike an appropriate balance between the prevention of money laundering and the permission to develop privacy-preserving technology.
The firm says that private cryptocurrencies are not in conflict with current laws, which goes against the decisions of various exchanges to remove these types of assets from their markets.
The analysis cites an interesting fact that the research firm RAND Corporation published in a report. According to the agency, Dash, Monero, and Zcash accounted for only 0.3% of the cryptocurrency addresses mentioned in the markets or forums on the dark web.
According to the study, this type of cryptocurrencies and other assets such as Bitcoin represent a lower risk than cash. For example, the analysts determined that cryptocurrencies pose “lower risk” when crossing borders.
The release of the Perkins Coie report comes a week after the US Internal Revenue Service (IRS) offered USD 625,000 to track users of Monero and the Bitcoin Lightning network. The IRS is seeking a tool that allows tracking private transactions “without the need for any outside agent.”
By Willmen Blanco
