Wednesday, 23 September 2020

Tighter cryptocurrency rules on the way

Cryptocurrency firms will be subjected to rules to prevent the abuse of digital coins, such as Bitcoin, for money laundering, a global watchdog has said, marking the first worldwide regulatory attempt to constrain the rapidly growing sector.

The Paris-based Financial Action Task Force (FATF), a coalition of countries from the US to China, told countries to tighten oversight of cryptocurrency exchanges to stop digital coins being used to launder cash.

The move reflects growing concern among international law enforcement agencies that cryptocurrencies are being used to launder the proceeds of crime.

Countries will be compelled to register and supervise cryptocurrency-related firms such as exchanges, which will have to carry out detailed checks on customers and report suspicious transactions, the FATF said.

Simon Riondet, head of financial intelligence at Europol, the European police agency that co-ordinates cross-border investigations, said he saw a growing use of cryptocurrencies in laundering criminal money.

Earlier this year, Europol broke up a Spanish drugs cartel that laundered cash using two crypto ATMs, machines that issue cryptocurrencies for cash.

Mr Riondet said cryptocurrencies were used to transfer money across borders, as well as to break down large criminal money transfers into smaller amounts that are harder to detect.

“We also have some investigation on the dark web in which the payments are made in cryptocurrencies, sometimes in Bitcoin, and they are switching it to more anonymised cryptocurrencies,” he said.

So-called privacy coins, such as Monero, allow users to conceal nearly all details of transactions.

The move by the FATF comes amid heightened concern about a sector, championed by some as a means of shaking off government controls, but seen by central banks as a potential threat to their status as guarantors of the financial system. Earlier this week, Facebook prompted criticism from regulators and policymakers when it unveiled its plans for a cryptocurrency it dubbed Libra.

Three European central bankers have claimed oversight over Libra to ensure it would not jeopardise the financial system or be used to launder money. The FATF marks the first attempt to establish a global approach in regulating the $300bn (€264bn) coin trading market, supplementing a current patchwork ranging from Japan’s move to licence exchanges to an outright ban in China.

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