Paris-based Financial Action Task Force (FATF), the global financial watchdog for money laundering, has taken a major step towards creating international standards for cryptocurrency, technology currently subject to sparse and sporadic regulations.
According to the FATF, the purpose of the new regulations is to help eliminate the use of digital currency for money laundering, terrorism financing or other crimes.
The FATF announced last Friday that it will begin publishing rules for international cryptocurrency regulation by next summer. Under the new rules, jurisdictions worldwide would be required to bring into force licensing schemes or regulations for cryptocurrency exchanges and some firms providing encrypted wallets.
The FATF has said that organisations providing financial services for the issuance of new cryptocurrencies – initial coin offerings – will also be included in the rule change. Those countries judged to be falling short could be added to a FATF blacklist that restricts access to the global financial system.
A Growing Need for Cohesive Cryptocurrency Regulation
To date, the global regulation of cryptocurrency has proved difficult, which has resulted in a mishmash of differing approaches by national governments, which has been further strained by volatile price changes and thefts from exchanges.
Bitcoin, the most popular cryptocurrency, saw its price soar 1,300% last year to a record of near $20,000 in December but has since plummeted, causing large ripples in the market.
In January of this year, Japan’s largest digital currency exchange, Coincheck, fell victim to a massive hack, which saw £380 million in digital assets lost.
Last year, Japan became the first to regulate cryptocurrency exchanges, while China and South Korea clamped down heavily on them. Other European countries, including Switzerland and Malta, are considering early stage supervision by regulating initial coin offerings. However, if real change is to be made a more unified global approach is likely to be needed.
Anti-money laundering lawyers have welcomed the move by FATF, but warned significant challenges would remain, such as the true identity of the owner of cryptocurrencies.