US Treasury Secretary Steve Mnuchin recently voiced his support for a global regulatory standard for the digital currency sector. He said that it could move cryptos away from illicit financing.
A positive turn for cryptocurrencies
Speaking at the Financial Action Task Force gathering in Orlando, Florida, Mnuchin said on Friday that a multi-government effort could help in fighting terrorism financing and money laundering. The guidelines mandate companies to collect customer information as well as information about the recipient of funds. They have to send this data to the service provider of the fund receiver with every transaction.
Following these standards and guidelines will ensure that cryptocurrency service providers don’t have to “operate in the dark shadows” as per Mnuchin. Showing a positive outlook on the sector, he said that the guidelines will enable this emerging fintech industry to stay a step ahead of rogue nations, criminals and other supporters of illicit causes who are looking for ways to transfer funds to each other without being identified.
Can the crypto industry comply?
Several participants in the crypto industry don’t have adequate means to collect and send the data required by the FATF guidelines. The rules will need collaboration from over 200 digital currency exchanges operating around the world. Many of these exchanges, including the largest digital asset exchange Binance, deliberately operate in countries with lighter regulations like Malta and the Caribbean.
The Financial Action Task Force (FATF) is headed by a US representative right now. The agency will review ways in which countries are subjected to the rules they are planning to implement in June 2020. Exchanges will face penalties and shutdowns if they fail to comply.
Mnuchin further noted that he had created a working group with the US Federal Reserve and other regulators. The group will ensure that digital currencies are used only for legitimate purposes. He added, “We will not allow cryptocurrency to become the equivalent of secret numbered accounts.”
With the new rules in place, the digital currency exchanges will have to work harder to comply. On June 11, the FATF announced that it will soon reveal guidelines that affect crypto industry participants. The rules will be applied to exchanges as well as custodian service providers and crypto hedge funds. Director of research at Messari Inc Eric Turner called it one of the biggest threats to the cryptocurrency industry at the time. He said that the FATF’s rules could have a more far-reaching impact than similar moves made by the SEC.