Governments and banks contemplate implementing greater regulations due to the 30% drop in the price of Bitcoin. The restrictions that the authorities impose on exchanges could put users’ privacy at risk.
Regulators in several countries believe it necessary to implement greater surveillance over the digital finance ecosystem, without stifling innovation. The reasons for this are the volatility of cryptocurrency markets, the risks of financial crime, and the growing popularity of crypto assets.
In countries like China and Sweden, they are currently developing their own central bank digital currencies (CBDC). Their authorities took tight measures against [decentralized] crypto assets, contributing to a market contraction of nearly 30%.
Some British banks, including Starling, Monzo, and Barclays, have also suspended transfers to cryptocurrency exchanges. They allege that there is a potential increase in suspicious money laundering financial activity, according to the British daily Telegraph.
Governments Show Concern about Decentralized Cryptocurrencies
For its part, the administration of US President Joe Biden is investigating “gaps” in the monitoring of cryptocurrencies. They are analyzing how to prevent someone from using them to finance criminal activities or terrorism.
The president of the US Securities and Exchange Commission (SEC), Gary Gensler, is also concerned about cryptocurrencies. He said that it is necessary to implement legislation on exchanges, highlighting money laundering and illicit activities as the main objective.
According to media reports, the SEC could reject eleven applications for the authorization of Bitcoin exchange-traded funds (ETF). Although the past market crash would be one of the reasons, the commission has not yet decided on it.
In Mexico, Santiago Nieto, head of the Finance Intelligence Unit (UIF) of the Treasury, has shown his concern about Bitcoin and other cryptocurrencies. He has called for the National Banking and Securities Commission (CNBV) to regulate these types of assets. In that way, he hopes that it will be possible to create risk models that prevent money laundering.
Regulations Could Put Users’ Privacy at Risk
The regulations applied to exchanges and cryptocurrencies are part of the objectives of the Financial Action Task Force (FATF). The latter seeks to mitigate the alleged risks that cryptocurrencies pose regarding the financing of terrorism and money laundering.
The supervision of service providers with crypto assets becomes stricter at the request of the international group. That involves greater know-your-customer measures and sharing user data between different providers.
Likewise, there is an expansion of the category of crypto asset and service provider. That includes stablecoin issuers, decentralized exchanges, DeFi tools, and even developers. This global coordination would put at risk the privacy of users, which is the essence of decentralized cryptocurrencies like Bitcoin.
Some of these regulations have already proven ineffective in the past. For example, China’s ban on using Bitcoin within the territory has not prevented the rise of its clandestine use. Since 2013, the government of China has banned the use of Bitcoin at least seven times, but it has not stopped growing.
By Alexander Salazar