Bitcoin Global News (BGN)
April 12, 2019 -- ADVFN Crypto NewsWire -- Know-your-customer
requirements could stifle the wild innovation of the blockchain
space if they are not reigned in a bit and at least, applied in a
more standardized fashion. CoinDesk’s article today on this makes
this particular idea clear through the example of what would happen
if every transaction required some sort of KYC.
In short, crypto platforms would
become inefficient to the point that doing business in the space
would likely become unprofitable for any party. Sending anything
frequently to a government agency or really, any agency takes time
and in the case of crypto networks, takes away from the idea that
the power to own and send money is in the hands of the
customer.
It’s an easy argument to make, yet
things are not that simple. To truly reach the point at which the
general public, including governing bodies, feel completely
comfortable with the blockchain and crypto, teams may have to work
within existing legal frameworks for the foreseeable
future.
Even with the SEC’s recent
announcement of its’ token offering framework, several holes seem
to exist in terms of how completely new laws could be developed and
implemented effectively to deal with the blockchain industry. For
starters, as CoinDesk has mentioned in the past, how do we define
“active participants?” In other words, which parties help
regulators to determine whether or not a crypto offering represents
a security? Do ICO promoters count?
What seems likely for now is that
most governments will simply use their existing security frameworks
to determine how to regulate cryptocurrencies, unless they are
Malta or one of the handful that has fully embraced the idea of
having a legal framework that is dedicated to crypto.
One of the key problems with this
is that with existing regulations come existing and often heavily
strict KYC and AML regulations. However, it does not have to be
this way. If governments can be convinced that KYC and AML can be
effective, while still protecting consumer privacy, then perhaps
things can change.
Perhaps the key hindrance to this
is that reportedly, a heavy handed approach to KYC and AML has been
extending beyond the crypto space to the financial industry in
general. It seems to just be how things are, for now, which is
accentuated by cases like the one mentioned today by CoinDesk that
involves the Financial Action Task Force.
If you don’t already know, the
Financial Action Task Force is a group that involves members from
several global governments, which is designed to work exclusively
on tackling financially-related crime. Since its’ members are from
more than 10 of the world’s most powerful countries, its’ opinion
on the subject matters for the world at-large.
According to CoinDesk, in a recent
document that the FATF drew up regarding the transfer of digital
assets from one customer to another, the organization recommended
KYC for basically every asset transfer. Even if this were done in a
minimalistic way, it would still reasonably mean having yourself
identified every time you do a transfer of any kind.
Since Chainanalysis, which
specializes in innovative KYC solutions for crypto, already spoke
out against the issue and was reportedly heard by the FATF, perhaps
this recommendation will never take effect. Because the FATF wants
to prevent anonymous illegal transactions from occurring and
Chainanalysis wants to support crypto customers’ rights to privacy,
a longer debate is probably ahead.
If anything should be taken from
this, it’s that we haven’t found the answer to KYC and AML that
satisfies both crypto users and governments just yet. Furthermore,
it’s possible that an entirely new solution will have to be
developed before any of this is solved, though it’s currently not
clear what that might be. In the end, a good starting point could
be the remember that crypto isn’t money as we know it.
By: BGN Editorial Staff