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While there’s no denying that crypto markets are booming all over the world, the growth rate that exists in Asia is considerably higher than anywhere else, and this can be of great help in shaping an apt set of regulations governing the growing industry.
The inter-governmental Financial Action Task Force, which was established around 30 years ago, had one purpose – ensuring the integrity of the global financial system. Today, with the U.S. at the presidency role until June 2019, the focus is on capturing funds related to weapons of mass destruction and implementing new AML/CFT strategies. One of the most significant steps? Track and take down networks which are well-versed with crypto-currency. Such networks easily pass through the radar via virtual currencies.
Countries around the world have shaky regulations when it comes to cryptocurrency. The need to have a comprehensive toolset for better control of this domain is high, and hence, FATF has taken this as its principal objective. These include a new project that seeks to identify best practices and also the establishment of a “clearinghouse” for investigators at all levels of law enforcement.
There are plans of hosting a ministerial meeting at the World Bank meeting that is going to be held in Washington, in 2019. The agenda, along with approving a new FATF mandate, is to provide an opportunity to the assembled members for enhancing and strengthening the current AML/CFT and proliferation-related financial detection and enforcement system.
Yaya J. Fanusie, the director of analysis at the Foundation for Defense of Democracies’ Center on Sanctions and Illicit Finance (CSIF), feels the moves made by FATF is for the greater good of cryptocurrency exchanges. He also added, the flow of cryptocurrency in Asia is growing and fails to see any efforts by the USA to better the compliance and regulation.
But how is the presence of actors like North Korea affecting compliance and enforcement efforts, and how are the U.S. and its partners responding to this challenge?
China-based news publication Asia Times asked Fanusie by email:
“From my standpoint, it’s difficult to tell. In general, I can say that (the US Department of the Treasury) is taking seriously the risk of various states using crypto-currencies to get around sanctions. I do not know if there has been a particular focus on Asia. What I have seen is Treasury beefing up its capabilities such as by announcing new vacancies for analysts who focus on virtual currencies. But this is for global coverage and not just one region.”
Fanusie believes part of the infamous Chinese crackdown in September 2017 was to try to curb such activity. However, he notes that Chinese consumers still trade in crypto in vast numbers, using exchanges which may be located outside China.
“China is an important place to watch because what seems to be happening is more about controlling the development of crypto-currencies than regulating it,” added Fanusie.
He highlights the Far Eastern superpower has a long-term cryptocurrency and blockchain strategic plan. The country has invested over $3 billion in blockchain projects this year alone and is looking to create national industry standards for distributed ledger technologies. China seems primed to lead the blockchain space and leverage it for its broader economic objectives. However, Fanusie thinks other nations “need to watch this and assess the potential geopolitical impact.”
China’s long-term intentions are getting clear with the development of a special developmental zone in Hainan Province specific to the crypto-sector. That being said, it won’t be the only big player in the crypto race, as various other Asian regions are knee deep in the space.
So does this mean any attempt to create an effective regional, let alone global, enforcement and compliance apparatus might be, for now, just a pipe dream?
Not according to Fanusie. He feels that the pipe dream can be a reality if enforcement will be divided into two categories. One, the framework that is being used for other money service businesses should also be used for cryptocurrency exchanges. Which won’t be a tough ask, except the new companies that have come up, need to play by and understand the rules.
Second, with the introduction of innovations in the crypto space, and experimental models like the Monero and Zcash, which are anonymous coins, don’t or might not fit in the regulatory framework.
Much of what is unfolding is so new and experimental, however, that a new regulatory and enforcement framework is not going to appear overnight.
“We are still seeing how this space is unfolding. This is where regulators are going to have to follow developments in the space closely, communicate regularly with technologists, and start thinking about when (or if) shifts need to be made in regulations,” concluded Fanusie.