Cryptocurrencies have been expanding around the world since they were created. Not only Bitcoin (BTC) but many others with different characteristics. However, there are some issues with them and how they are regulated. Regulatory agencies have had a difficult job to properly address regulations of virtual currencies.
Crypto Regulations and their Effect
Noelle Acheson, a member of CoinDesk’s product team, wrote an article in which she talks about regulations and their impact in the crypto market. She explained that in June 2018, the European Parliament and Council published an update related to AML which is known as AMLD5.
With these new rules, crypto exchanges and wallets operating in the European Union would have to implement strict Know-your-Customer (KYC) procedures to have information about each of the users participating. These companies would also have to report suspicious activity to relevant agencies in each of the countries, that includes tax collectors.
These kinds of regulations are trying to be implemented not only in Europe but in many countries as well. Back in December, G-20 leaders met in order to discuss different issues and topics. One of these conversations was focused on AML rules and how to follow the standards imposed by the Financial Action Task Force (FATF).
There are some concerns regarding these regulations because they go against what cryptocurrencies stand for. Experts believe that digital assets were created to circumvent authorities and third parties but they seem to be controlled specifically not to be able to grow in the way they were planned.
In addition to it, being compliant to new regulations could harm the whole industry by slowing the innovation process and increasing costs for already operative companies.
Noelle Acheson believes that these AML rules are going to help and not harm the sector. As she explains, AMLD5 provides an official definition of virtual currency.
“A digital representation of value that is not issued or guaranteed by a central bank or a public authority, is not necessarily attached to a legally established currency and does not possess a legal status of currency or money, but is accepted by natural or legal persons as a means of exchange and which can be transferred, stored and traded electronically.”
As she mentions, this could help increase in banks’ confidence at the time of dealing with virtual currencies and exchanges. In general, exchanges find many barriers to operating with financial institutions such as banks due to the lack of proper AML regulations. Furthermore, it can also help increase custody services by financial institutions around the continent.
According to a recent report released by Chainalysis, effective use of distributed ledger technology would make it much harder to launder money. This would enable market participants to collaborate with law enforcement agencies and comply with privacy legislation.
Thus, there are many reasons to think that regulated virtual currencies could be something positive for the market rather than something negative. Nonetheless, it is always important to hear what critics have to say and which are going to be the effects over privacy that these rules are going to have.