US to Strictly Enforce Crypto Rules Similar to FATF Guidelines
The U.S. government will strictly enforce the rules on cryptocurrencies similar to the standards recommended by the Financial Action Task Force (FATF). The Financial Crimes Enforcement Network has reaffirmed that its “Travel” rule applies to cryptocurrencies. Meanwhile, the Federal Reserve has flagged stablecoin as a potential risk to the U.S. financial system in a new report.
The U.S. Financial Crimes Enforcement Network (Fincen) will strictly enforce anti-money laundering (AML) rules on cryptocurrencies, Director Kenneth Blanco reportedly said on Friday. Fincen is a bureau of the U.S. Department of the Treasury with a mission to combat money laundering and safeguard the country’s financial system from illicit use.
The bureau requires cryptocurrency firms engaged in money service businesses, including crypto exchanges and wallet service providers, to share information about their customers. Specifically, the “Travel” rule requires them to verify their customers’ identities, identify the original parties and beneficiaries of fund transfers that are $3,000 or higher, and transmit that information to counterparties if they exist.
The Travel rule was first issued by Fincen in 1996 as part of the AML standards for all U.S. financial institutions. The rule was expanded in March 2013 to apply to crypto exchanges and reinforced in the crypto guidance issued in May this year. Reuters noted that the May guidance confused some businesses, as they thought the rule did not apply to them. At a conference hosted by blockchain analysis firm Chainalysis on Friday, Blanco was quoted as saying:
It (travel rule) applies to CVCs (convertible virtual currencies) and we expect that you will comply period.
“That’s what our expectation is. You will comply. I don’t know what the shock is. This is nothing new,” he reiterated. The Travel rule is the most common violation for money service businesses engaged in cryptocurrencies, the director revealed, adding that Fincen has been conducting examinations which include ensuring compliance of the Travel rule since 2014.
FATF Standards and the Travel Rule
The AML rules enforced by Fincen are similar to those recommended by the FATF, an inter-governmental policymaking body whose purpose is to establish international standards to combat money laundering and the financing of terrorism. The FATF issued its new guidance for crypto assets and related service providers in June.
At the June G20 leaders’ summit in Japan, the U.S. and other countries reaffirmed their commitments to applying the FATF standards. The G20 finance ministers and central bank governors similarly announced their commitments to implementing them. However, the crypto industry has raised several concerns regarding the challenges in applying the rules, which are not legally binding but countries that refuse to comply risk being put on a blacklist.
Like Fincen, the FATF has recommended crypto asset service providers and regulators worldwide to implement the rules similar to the Travel rule, giving them about a year to do it from June. However, the threshold set by the FATF is $1,000 or 1,000 euros. In October, the FATF revealed that its “assessments will specifically look at how well countries have implemented these measures.” It remains to be seen if Fincen will further update its rules on crypto assets.
Fed Flags Stablecoin as Risk to Financial Stability
Coinciding with Director Blanco’s statement, the U.S. Federal Reserve issued a report Friday following its recent semi-annual financial stability review. The 60-page report has a dedicated section on stablecoin which the Fed has flagged as a potential risk to the country’s financial system.
While acknowledging the benefits of innovation, the Fed believes that “the possibility for a stablecoin payment network to quickly achieve global scale introduces important challenges and risks related to financial stability, monetary policy, safeguards against money laundering and terrorist financing, and consumer and investor protection.”
Shortly after Facebook announced its plans for the Libra project, a number of countries raised concerns over the digital currency. Several U.S. lawmakers have tried to shut down the project and some countries have increased their efforts on central bank digital currencies to compete with Libra. Noting that it is not looking to issue its own digital currency at this time, the Fed said that a number of challenges must be resolved before Libra can be launched in the country.
What do you think of Fincen strictly enforcing its crypto rules and the Fed flagging stablecoin as a risk to the U.S. financial system? Let us know in the comments section below.
Images courtesy of Shutterstock, Fincen, and FATF.
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A student of Austrian Economics, Kevin found Bitcoin in 2011 and has been an evangelist ever since. His interests lie in Bitcoin security, open-source systems, network effects and the intersection between economics and cryptography.
Bank of America Shuts Former PayPal Exec’s Bank Account and may have also Closed Justin Sun’s
Tron (TRX) CEO Justin Sun is the latest crypto executive to have his account terminated by a Wall Street Bank. Ex-PayPal executive Roelof Botha, also suffered a similar fate with commentators highlighting the need for greater crypto adoption amid financial censorship from mainstream actors.
“Bitcoin Fixes This”
Sun’s tweet was in response to Botha’s early tweet, where the ex-PayPal executive stated that the Bank of America (BofA) had terminated his account. Though at the time of publishing, that tweet is unusually no longer available.
On Monday (November 18, 2019), Botha shared a screenshot of a notification received concerning the closure of the account from the BofA. According to the screenshot, the bank took the action after evaluating Botha’s banking
But the venture capitalist seemed to be at a loss as to why the American bank would close his account without a reason.
“After being a customer of @BankofAmerica for 20 years, I received this notice today that they decided to fire me as their customer! With absolutely no explanation.”
Vinny Lingham, CEO of Civic, asked if the former PayPal executive bought bitcoin, a question which suggested could be a reason for the bank’s action. Also, other commenters were quick to welcome Botha to the crypto community, while also seeing the action of BofA as an opportunity for bitcoin. Others stated the popular phrase in the virtual currency space: “Bitcoin fixes this.”, thereby urging Botha to consider bitcoin.
However, some other commenters were quick to state that the former PayPal executive got a taste of what it looked like to be dumped without explanation. According to an earlier report by BTCManager, the online payments company, PayPal, cut off its services to thousands of PornHub models without an official explanation for its actions.
In response, the crypto community suggested that the adult entertainment community switch to bitcoin and other digital currencies because they were censorship-resistant.
Crypto Association is Anathema for Wall Street Banks
The action from the BofA comes as no surprise, as Wall Street Banks have a history of anti-crypto leanings. The excuse most of these banks give is that digital currency is used for terrorist funding and money laundering.
The BofA earlier banned customers from buying digital currencies with its debit and credit cards, stating that the crypto payment system is not as transparent as the mainstream banking system. Also, back in July 2019, a Wells Fargo customer complained about the inability to carry purchase virtual currency on the account.
In response to the customer’s complaint, the Wall Street bank stated that it prohibited crypto transactions, a reply that didn’t go down well with the crypto community.
In late-October, Bitcoin incurred an explosive rally that sent its price from lows of $7,300 to highs of over $10,600. This price rally came just hours after the Chinese President made bullish comments on blockchain technology, which generated optimism that these comments would mark the start of a pivot away from the country’s predatory policies on crypto.
In spite of this, a recent segment on a Chinese state-sponsored media channel elucidates that Beijing is still ardently opposed to cryptocurrency, deeming digital assets as unregulated securities, fraudulent investment vehicles, and Ponzi schemes.
Chinese Government Ardently Opposed to Crypto
The bearish comments relating to cryptocurrencies came about during a recent segment on a high-profile Communist Party official channel, in which the President offered a bearish sentiment on digital assets, noting that many may soon be on a crime list.
Dover Wan, founding partner at Primitive and a popular China-focused crypto analyst, spoke about the recent segment on this television channel in a recent tweet, concluding that the government has no intention of embracing crypto anytime soon.
“JUST IN: Today CCTV1 (CCP official channel) featured another investigative work of ‘cryptocurrency’ on 焦点访谈, which I would considered 60 minutes or even higher profile TV program. TL;DR – cryptocurrency is unregistered security, financial fraud and illegal ponzi.” She explained while referencing the video embedded in the below tweet.
China Takes “Blockchain, Not Bitcoin” Approach to Cryptocurrency
This latest development comes shortly after Chinese President Xi Jinping stated that blockchain technology would play “an important role in the next round of technological innovation and industrial transformation.”
Based on the latest round of anti-crypto statements from the Chinese government, it does appear that they are doubling down on the “blockchain not Bitcoin” narrative that many analysts had suspected the country would continue adhering to.
“It’s pretty clear to me China has no intent to embrace any public open cryptocurrency at all and that’s why it’s always a Blockchain Not Bitcoin narrative. And down the road a nationalization of related cryptocurrency infrastructure is inevitable (asic, mining, trading),” Dovey explained in another tweet.
It remains unclear as to whether or not China’s views towards cryptocurrencies will change as they garner more widespread adoption globally, but in the near-term it does not appear that there will be any shift in the country’s adverse policies towards crypto.
Venezuela’s President Nicolás Maduro has recently stated the country’s oil-backed cryptocurrency, the Petro, has over 27,00 ‘affiliated businesses’ which could mean the government’s push for its adoption is working.
Speaking during a program led by local journalist José Vicente Rangel, Nicolás Maduro revealed the number is expected “to double in the coming months,” presumably as the Venezuelan government keeps pushing for Petro’s adoption.
During the program he also said the country’s retirees and pensioners will be receiving their Christmas bonuses in Petros, and that the government will “active new protection mechanisms with the Petro.”
Nicolás Maduro further added the country is looking to “defend the bolivar” but will evaluate how “a dollarization process can be used to achieve economic recovery.” He clarified, however, Venezuela will “always have the bolivar as its currency.”
Maduro added the country’s cryptocurrency helped it against the “economic war” supposedly being fought against it, and seemingly mentioned he’s aware of the growing popularity other cryptocurrencies have in the country:
We have achieved the slowdown of the economic war through the self-regulation of the economy. With this self-regulation of the economy, other actors have begun to operate with their own currencies.
The Petro itself was a cryptocurrency the Venezuelan government launched last year and sold to investors, accepting cryptocurrencies as a payment method for the tokens. According to critics the Petro’s sale was used as a way for Venezuelan to bypass international sanctions and obtain foreign currency.