New Regulations In Europe Established For Cryptocurrency, Working To Reduce Money Laundering And Terrorism Activity
For the last two years, ever since cryptocurrency reached a high point, the concept of regulation has become increasingly important. In Europe, the need for this type of oversight has been constantly present, and they already have policies that control what happens with cryptocurrencies. However, last month, the Financial Action Task Force (FATF) decided to become stricter to avoid criminal activity.
The FATF originally entered the financial work in 1989, when it was established by the G7. Their immediate role was to establish certain legal, regulatory, and operational measures that would prohibit and prevent various entities from participating in money laundering schemes globally. In the time that it has been active, it has been a major part of the various recommendations that have made it possible to fight this and other criminal activities.
With the way that many investors have been working fervently in trading their crypto assets on exchanges, governments around the world are forced to make decisions about regulating. The reactions have been varied, with some countries having a complete handle on how cryptocurrencies work in the area, while others have completely banned then.
To help with these regulatory measures, the FATF organization established a “risk-based-approach” guideline three years ago. This made it easier for all of these jurisdictions to find similar ground in preventing money laundering and terrorist financing. Right now, the FATF has 35 countries as members. Many of the members are in Europe, including (but not limited to):
- United Kingdom
Considering the heavy involvement in this region, it’s even more important for the members of the FATF to pay attention and comply with the new updates to the regulatory measures. The main reason that the organization brought in new policies is based on the requests for more clarity on the activity to which the guidelines apply.
The amended policies state that exchanges, wallet providers, and providers of financial services for ICOs are all subjected to the CFT regulations and the AML protocols. To comply, the FATF says that they need to go through the proper licensing, registration, and monitoring procedures for their country.
South Korea already has a similar process in place, though they’ve issued a ban on any anonymous trading and implemented stricter guidelines for the protocols. Along with AML and CFT regulations, they have also introduced Know-Your-Customer policies. Along with the policies that FATF is ordering, the Russian government also wants rules in place for anything that exceeds 600,000 rubles in a transaction. They presently don’t have an official set of regulations for cryptocurrency, but it is in progress.
Along with the clarification on who is subject to the guidelines, the FATF is also establishing certain procedures and standards for virtual asset issuers and classification of ICOs. Financial institutions, banks, and similar entities will have rules established for getting involved with blockchain technology and crypto projects.
Even with the general guidelines, the UK has separately worked on improving the market. The HM Treasury, the Financial Conduct Authority, and the Bank of England collaborated to form a Crypto Asset Taskforce, which was announced in a report in October. The report also speaks about the benefits to be found in blockchain technology, though cryptocurrency doesn’t get as positive of a reaction.
The report notes,
“There is limited evidence of the current generation of cryptoassets delivering benefits, but this is a rapidly developing market and benefits may arise in the future. There are substantial potential risks associated with cryptoassets, and the most immediate priorities for the authorities are to mitigate the risks to consumers and market integrity and prevent the use of cryptoassets for illicit activity.”
Even with the recommendation, some investors see them as a “blunt instrument approach.” The involved parties that compiled the report believe that, by maintaining a heavy hand in their regulations, cryptocurrencies may not develop as progressively as they could. The same is noted of fintech companies.
Right now, the FATF’s guidelines are merely a suggestion, and are non-binding to members. However, the advisory stance that they take on can make the process of regulating in other jurisdictions substantially simpler. The president of the FATF, Marshal Billingslea, said that there should be new governing rules for the industry by June next year, according to a report with Reuters.