The crypto industry has grown significantly over the last few years, and governments and regulators have recognized that the industry requires proper regulations going forward. The Financial Action Task Force (FATF) has been one of the leading regulatory bodies putting in place regulations for cryptocurrencies, and several governments have committed to implementing FATF regulations in their jurisdictions.
In a bid to comply with FATF regulations, 15 countries have come together and agreed to create a system that will assist with the management of cryptocurrency. This system will grant the involved governments the ability to gather and share personal details about people who engage in the transaction of digital assets. The FATF is designing the system, and the regulator hopes to have robust measures in place by 2020.
FATF interest in cryptocurrency
One of the biggest challenges which the crypto industry has been facing has to do with money laundering and fraudulent activity. Regulators and governments are concerned that the anonymity that comes with digital assets allows perpetrators of financial crimes to get away with their illicit activity without being detected. This is primarily why the FATF is focused on developing a system which will enable authorities to identify illegal crypto activity and the individuals involved in it.
Countries are not obligated to take up the FATF’s regulations. The rules and regulations can be adopted according to the discretion of a government, and they can choose to alter the practices to suit their policies. However, if a government chooses not to adopt the FATF’s regulations, it runs the risk of being blacklisted by the regulator, and this could affect the country’s economic engagement with other FATF governed countries.
Registration and licensing of crypto related businesses
Part of the guidelines issued by the FATF address the issue of licensing of crypto related businesses. Proper licensing and registration measures allow regulators to be then able to monitor the companies involved and makes it easier to see if involved individuals are operating within the law.
In several countries where crypto trading has been regulated, registration with concerned financial authorities is a prerequisite for crypto businesses. Crypto exchanges in Japan are required to be registered with the Financial Services Agency which has currently registered 19 exchanges. South Korea, through its Financial Intelligence Unit (FIU), has stated its intentions to offer crypto exchanges regulatory services and assimilate these exchanges into the mainstream financial system of the country.
There are different systems which can be used to regulate cryptocurrency, and South Korea has chosen the real-name system. The implementation of this method means that traders and investors in the country have limited anonymity, and this helps the regulator to fight against money laundering. The system links exchange accounts with a person’s bank account, which means that authorities have access to a user’s details. Exchanges which do not comply with this system will be denied registration in South Korea.
The Bottom Line
The crypto industry has attracted the attention of several governments, and there are efforts to regulate digital assets. There are a variety of methods available to national regulators which they can use to ensure that they have control over the trade of cryptocurrency. These regulations are coming, and crypto related businesses have to make sure that they are set up to operate within the confines of these regulations.