Cryptocurrencies have scaled so many blockades since the emergence of the first blockchain output, Bitcoin. In the past couple of years, digital currencies are beginning to gain more ground in acceptance and awareness, but stern prying by the government and financial regulatory authorities may hinder the free advancement and institutional adoption.
The Financial Action Task Force, on June 21, will publish a note to decide how participating nations should monitor virtual currencies. FATF is a governmental body that takes charge of developing recommendations for combating money laundering and financing of terrorism, backed by 200 countries including the united state.
Speaking on behalf of FATF, Alexandra Wijmenga-Daniel, stated in an email, the type of businesses that will be affected by the new rules. These are businesses working with cryptos and tokens, like exchanges, crypto hedge funds, and custodians.
There is fear that these rules may have a great impact on digital assets and threaten its advancement to the mainstream. It is anticipated that the impact will be more than the SEC or other financial regulatory bodies, according to an email by the Director of research at crypto researcher Messari Inc., Eric Turner.
The Hardest Part of the FATF Rules
Large exchanges like Coinbase Inc. and Kraken would be required to collect the data of customers initiating transaction of over $1000 or 1,000 Euros, and also details about the recipients of these funds. The data collected would be sent to the recipient’s service provider along with each transaction.
The challenges are that there may be difficulties in complying with these rules. The digital ledgers supporting cryptocurrencies are anonymous, exchanges will not be able to know the recipients of these transactions.
The current technology operated by exchanges is not cable of enabling compliance to these rules.
Effect of FAFT Rules on Crypto Exchanges
So many exchanges may be forced to shut down for non-compliance.
Exchanges based in the United States will be forced to lose customers. So many would resort to private trading like the OTC to deal directly with customers.
These new rules will hit hard on the crypto space’s chance for institutional adoption, enterprise acceptance and move to the mainstream.