Last Updated on
Most institutions are aware that without regulation for the cryptosystem to guide its financial operations may be difficult for government as a watchdog to prevent financial security breach such as money laundering, therefore several countries are applying standards set by the Financial Action Task Force (FATF) in establishing a new cryptosystem for cooperation and sharing of information amongst participating nations.
Safety and Regulatory measures based on FATF standards
FATF is recognized as an international organization working with the national government of several countries to establish and implement policies to combat financial crimes such as money laundering in several nations. Its core duty is monitoring the compliance of the participating countries in applying recommended standard rules contained in its financial policy issued to member countries. A statement to this effect was issued in June stating that:
In implementing the policies issued by the organization, a 12 month review period is set for countries and service providers until June 2020.
Although the intergovernmental organization has made clear that its policies are non-binding and do not interfere with member’s internal governmental checks and laws however, members that do not implement its policies risk being banned.
The obligations of member countries was clearly stated after the FATF summit in June by the U.S. Secretary of the Treasury, Steven T. Mnuchin, that requirements for crypto service providers are to “document and recognize whom they are transferring crypto’s for, also to document and recognize the receiver of such crypto’s deposits” and implement procedures where they are required to share those data with other service providers of virtual assets, and law enforcement agencies.
Under the FATF policies, it is required that member countries supervise the activities of service providers by issuing licenses or register them while applying the same standard security measures as traditional financial institutions through appropriate national monitoring authorities.
It is imperative to discuss here that several countries already opted for the idea of reviewing their existing money laundering laws to accommodate and cover crypto assets instead of making new laws specifically for cryptocurrencies. These new laws are introduced to existing AML laws requiring crypto exchanges to be approved by its financial authorities.
For instance, in South Korea, it’s Financial Intelligence Unit (FIU) under the Financial Services Commission (FSC) has disclosed a plan to directly regulate cryptocurrency exchanges by including them into the regulatory framework. At present, South Korea’s FIU does not fully regulate cryptocurrency but does so by issuing exchanges a guide, using its financial administrative policies to banks.
An official of the FIU disclosed that a cryptocurrency exchange regulatory framework will be established as advised by the FATF.
Normalizing cryptocurrency for most countries’ financial authorities can mostly be achieved by embracing the FAFT policies in regulating the activities of crypto users and its service providers.