Crypto Regulations Must Have International Focus in 2022 and Beyond

03/07/22 10:14 AM

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Cryptocurrency regulations are evolving quickly around the globe as authorities respond to the growing risks posed by criminals exploiting the latest payment methods to mask and launder the profits from their crimes.

According to William Je, founder and CEO of Hamilton Investment Management, this growth has warranted the introduction of a more stringent level of due diligence by additional bodies who will bring in additional protection..

“As regulators improve their understanding of these criminal practices, AML requirements have also been improved. However, these improvements have been a reactive process.”

The European Union has started to introduce financial regulations that further bolster the regulatory system in order to improve licensing models. Many member states are regulating crypto-assets individually, and Germany is leading the way in being the first to regulate. Je believes these actions and their expressed requirements provide a path companies can take to obtain licensing from regulators.

As crypto evolves, so have regulatory bodies’ efforts to monitor, address and enforce restrictions. The most prominent is the Financial Action Task Force (FATF), which details guidance and determines best practices in anti-money-laundering practices and combating the financing of terrorism.

FATF Recommendations number 16, better known as the “travel rule”, which requires businesses to collect and store the personal data of the originators and the beneficiaries in blockchain transactions, is the most notable.

“In theory, access to this data will enable authorities to have better oversight and enforcement of crypto market regulations. In other words, they’ll know exactly who is doing exactly what.”

“As we have always argued – transparency is key. We need to regulate crypto as an asset class with efficacy, which necessitates legislation that is applicable specifically to digital assets and does not hinder the market.”

Because the criminals exploiting cryptocurrencies are international, so must be the efforts to stop them, Je said. But blockchain’s decentralized nature makes this hard to accomplish. Rules and regulations for traditional financial institutions are being implemented wholescale into the crypto sector. He believes this is arguably wrong-footed as it ignores the innovation and uniqueness this asset class and its underlying technology entails.


(Credited by Tony Zerucha)

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