Bitcoin has been back in the saddle the last few weeks, hovering around the $10,000 mark, despite detractors making unsupported intimations that crypto is unregulated and used primarily by criminals. In this case, some clarifying points are in order to refute the "rough week" opinion of the article's author:
- The most successful (and remaining) crypto-based businesses have been using compliance as a market differentiator for a few years now. Walk into any credible exchange, PSP, or custodian business and you'll see resources and dedication to AML, sanctions, market fairness and anti-fraud on par with traditional financial services.
- Banks have more connectivity to crypto than ever before.
- According to the most recent Chainalysis report, illicit activity makes up less than two percent of transactions.
- The fact that the level of illicit activity is even traceable through crypto is a great leap forward. How much laundered money is detected throughout the traditional financial system?
- Regulations are not "on the way." They are already here, with compliance rules and frameworks provided by DOJ, OFAC, OCC, IRS, CFTC, SEC and NYDFS, and the wide menu of existing financial crime regulations. While more crypto-specific tailoring of the rules is certainly appropriate, the implication that Bitcoin is the wild west seems a bit exaggerated.
- There is a crypto industry-wide effort to initiate regulatory clarity and customize those rules as needed. This is not something that legitimate crypto businesses are running away from. (See: VCA, TRISA, and Market Integrity Working Group)
- Bitcoin businesses have been identifying mixers as a high-risk component of the blockchain transnational environment for a while. Often, transactions with a crypto mixing component are flagged as suspicious, investigated and reported as needed.
For more information regarding the regulatory compliance landscape for cryptocurrencies, click here.
Mnuchin, who last year echoed U.S. president Donald Trump's criticism of bitcoin and cryptocurrencies, told the Senate Finance Committee the U.S. Treasury Department's Financial Crimes Enforcement Network (FinCEN) is preparing "significant new requirements" around cryptocurrencies and we'll "be seeing a lot of work coming out very quickly." "We want to make sure that technology moves forward but, on the other hand, we want to make sure that cryptocurrencies aren't used for the equivalent of old Swiss secret number bank accounts," Mnuchin said, adding FinCEN and the Treasury Department more broadly are "spending a lot of time on this."