FATF Meets To Finalize Common Cryptocurrency Guidelines For G-20 Nations
The FATF Meet To Finalize The Common Crypto Guidelines For G-20 Nations
The Financial Action Task Force (FATF) has finally kicked off the meeting to finalize the final draft of the global crypto regulation guidebook, which the participating G-20 nations have assured to implement in their system. Some of the recommendations put forward by the committee responsible for creating the guidebook has faced a few objections from the crypto community and thus FATF has scheduled a meeting during the G-20 summit to influence the policymakers.
The Financial Action Task Force (FATF) is a global standard-setting body which comprises of 205 members. The meeting will be attended by the IMF, UN, World Bank, and others in the coming week in Orlando, Florida. The meeting would see some important point of discussions like how to protect the integrity of the financial system as well as making progress towards a global regulations policy for digital assets.
“During six days of meetings, they will discuss a range of important issues, focused on protecting the integrity of the financial system and contributing to global safety and security. This includes further progress in the regulation of virtual assets, with strong support from the G20.”
G-20 Nations Commit To Implement a Global Virtual Currency Regulation Policy
In the ongoing G-20 summit various finance ministers, as well as central bank governors, released a joint statement stating that During six days of meetings, they will discuss a range of important issues, focused on protecting the integrity of the financial system and contributing to global safety and security. This includes further progress in the regulation of virtual assets, with strong support from the G20.”
The statement further read,
“While crypto-assets do not pose a threat to global financial stability at this point, we remain vigilant to risks, including those related to consumer and investor protection, anti-money laundering (AML) and countering the financing of terrorism (CFT).”
The participating countries in the G-20 summit also assured that they will comply with the FATF's new crypto guidance whenever it is finalized. The participating nations jointly assured stating,
“We reaffirm our commitment to applying the recently amended FATF standards to virtual assets and related providers for AML and CFT. We look forward to the adoption of the FATF Interpretive Note and Guidance by the FATF at its plenary later this month.”
The Proposed Recommendations
The FATF issued a proposed guideline for virtual asset regulations on February 22 and now it would issue another draft which would guide the G-20 nations to implement these proposed guidelines in their respective countries. FATF also invited the private sector to provide feedback on its proposed guidelines.
The FATF stated,
“The text of the new Interpretive Note has been finalized, and will be formally adopted as part of the FATF standards in June 2019.”
However, the cryptoanalysis firm Chainalysis has pointed out that some of the recommendations proposed by the FATF are quite difficult to implement and comply by. For example, one recommendation requires the virtual asset service providers (VASP) obtain and hold accurate originator information as well as beneficiary information.
“This would require VASPs not only to verify their customers’ identities, but also to identify the recipients of their customers’ transfers, and transfer that information. This would be applicable to all transactions above a 1,000 USD/EUR threshold.”
Chainalysis in its feedback report on the proposed guidelines to the FATF wrote that the current draft would have profound implications on the cryptocurrency space. The feedback report outlined some of the possible roadblocks that may come in the way for the implementations and read,
“There are clear technical obstacles that prevent cryptocurrency businesses from being able to comply with these standards. In most circumstances, cryptocurrency exchanges are unable to tell if a beneficiary is using another exchange or a personal wallet.”
The feedback report went on to explain the current problem of inadequate infrastructure between numerous cryptocurrency business today. The report states that the current form of the draft by FATF would decrease transparency and lead to complex issues in the near future.
Jeff Horowitz, Coinbase’s chief compliance officer, also stated the same saying that the current recommendations for the VASPs are not practical and can lead to more problems than solutions. He explained,
“Applying bank regulations to this industry could drive more people to conduct person-to-person transactions, which would result in less transparency for law enforcement.”
John Roth, Bittrex’s chief compliance officer, also expressed the same concern over the current recommendation for VASP stating that the current infrastructure of cryptocurrency exchanges cannot determine the ownership of the transferred fund since most of the wallets are anonymous. He remarked,
“It’s either going to require a complete and fundamental restructuring of blockchain technology, or it’s going to require a global parallel system to be sort of constructed among the 200 or so exchanges in the world … You can imagine difficulties in trying to build something like that.”
FATF Seriously Needs To Look Into The Feedback Reports
Most of the private sector and stakeholders of the decentralized space have expressed their concern over the specific recommendation for the VASP. However, Chainlysis said that if FATF does not look into the concerns then the member countries would have to comply with the drafted recommendations. Chainlysis said that FATF is a large standard-setting body which comprises of 205 members and if any country refuses to comply by its standard they will be put under the “non-cooperative countries.”
If a country is listed among the non-cooperative nations, it would have far-reaching consequences especially on the potential financial borrowings and aids from IMF and World Bank. Apart from that these non-cooperative countries also risk a downgrade in ratings from Moody’s, S&P and Fitch, which would eventually lead to a loss of bond market and loss of access to Euro and dollar.
Japan has been at the forefront of the crypto race with some of the most customer-friendly regulations. The success of Japan as one of the few crypto compliant nations made it a center for other nations struggling with their policies to seek some help. Although the G-230 nations have agreed to follow common standard guidelines set by the FATF, some of the recommendations are too complex and technically flawed to implement.
However, FATF has decided to discuss the feedback provided by various private sector participants and hopefully at the end of the meeting, we will have a better draft which can be easily followed and complied.