International guidelines for the regulation of Bitcoin and other crypto currencies will soon become reality. Industry players are worried. There is a threat of technical difficulties in implementation. Bitcoin is starting to get used more and more by traders and gamblers as well.
A storm is brewing in crypt heaven. The International Financial Action Task Force (FATF) adopts its planned guidelines for the regulation of Bitcoin & Co. on 21 June. The regulations apply to all crypto companies. The news portal Bloomberg, which has this information at its disposal, therefore spoke with various representatives of the Bitcoin industry about the impending consequences. Many players seem to be seriously worried. Eric Turner, Research Director at the Messari Crypto Research Center, even described the regulations as “one of the biggest threats to cryptography today. (Source: icharts.net)
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This is initially due to the international character of the FATF. The advisory board of the organization, which is dedicated to the fight against money laundering and terrorist financing, comprises 38 states and two international organizations. In practice, however, more than 180 states adhere to the guidelines issued by the FATF. Failure to comply with them would be tantamount to exclusion from the international financial system. In addition to its almost global validity, however, it is above all one of the planned guidelines that is making the Bitcoin world sit up and take notice. Bitcoin exchanges must collect information about the recipients of crypto payments.
- This regulatory policy requires Bitcoin exchanges and similar service providers to collect information about all customers whose transactions exceed $1,000.
- The FATF is not just asking for information about the initiator of the transaction.
- The exchanges must also collect information about the recipient and pass it on to the recipient’s payment service providers.
- What sounds simple could prove extremely difficult in practice.
The catch is the technical nature of crypto currencies. After all, wallet addresses are anonymous, so the exchanges cannot know who the recipient of a payment is. John Roth, Chief Compliance and Ethics Officer at Bitcoin’s Bittrex exchange, outlined the only two possible scenarios to Bloomberg:
Either a complete and fundamental restructuring of the blockchain technology will be necessary, or a global parallel system will be needed, which has to be set up among the 200 or so stock exchanges in the world.
According to Bloomberg, some crypto exchanges are actually considering setting up such a system. This would probably lead to increased compliance and transaction costs. In such a case it would be conceivable that customers would settle their Bitcoin transactions directly and without the stock exchanges. It remains questionable how quickly and with what severity the regulations are implemented. The FATF could well grant the industry a transitional period. Whether an international regulatory framework will come, however, is certain. Only a few days ago, the G20 countries agreed on the need for a multilateral solution.