Contrary to the prevailing narrative, the incoming Financial Action Task Force (FATF) anti-money laundering (AML) guidelines for cryptocurrencies might not be overly negative for the industry. However, there are still a few vague aspects of the FATF’s document that might require a little extra clarifying before it publishes its interpretive note later in 2019.
According to Coin Center, detailed analysis of the published guidance show similarities with already existing provisions set forth by the U.S. Financial Enforcement Network (FinCEN) especially concerning money services businesses (MSBS).
Cryptocurrency legal expert Jake Chervinsky also provided a breakdown of the FATF’s guidelines, showing them not to be overly negative for cryptocurrencies. For one, the narrative that states that the new recommendations call for the entire industry to follow the same compliance standards mandated for banks and other financial institutions in incorrect.
The FATF recommends that AML regulations should apply to centralized crypto exchanges and custodial wallet providers. Other industry participants like developers and miners do not fall under the ambit of AML compliance under the FATF paradigm.
Many regulatory jurisdictions in the world today already stipulate strict AML and know-your-customer (KYC) protocols for exchanges. By adopting FATF recommendations, the exact extent of these laws might begin to achieve some form of uniformity across different nations.
Clarifying KYC Requirements for Crypto Transfers
One area that could potentially be problematic moving forward is the vagueness in the KYC requirements for cryptocurrency transfers. The issue comes in the scope of AML/KYC compliance on the subject of such transfers.
Like money transmission laws, there is a consensus among stakeholders that AML/KYC compliance be limited to exchanges – platforms that take custody of virtual currency assets during the transaction process.
Specifying such a concise scope would eliminate unnecessary compliance burden falling on participants like mining nodes. There is also some concern for what this aspect of the FATF’s recommendation would mean for peer-to-peer (P2P) platforms that usually do not custody cryptocurrencies during the transaction process.
The FATF also wants member countries to adopt a streamlined regulatory framework for the “wire transfer rule,” as it applies to cryptocurrencies. This portion of the guidelines if adopted will see exchange platforms having a set of standardized rules for customer information exchange among trading platforms for cross-border transactions.
In summary, the FATF guidelines mirror already existing regulations from bodies like FinCEN. The scope of its applicability appears, for the most part, to exist within reasonable limits and don’t constitute anti-cryptocurrency regulations.