About 15 governments are planning to work together to share crypto transaction and user data for prevention of money laundering for illicit and terror activities. The new system will allow them to collect personal information and share it amongst themselves. The Financial Action Task Force (FATF), an international organization that counts the biggest economies on earth among its members, will be responsible for designing and managing the system. FATF has already created a set of standards for the sector.
The move is expected to speed up development of regulation for cryptocurrencies in individual countries. For the most part, countries have either banned crypto or resisted putting specific guidelines in place for the new asset. This has helped in the proliferation and popularity of cryptocurrencies.
The new asset is reported to have become a favored instrument to circumvent capital controls and transfer money cheaply. For example, some say that Bitcoin has become a “safe haven” of sorts during times of global volatility. (But there is little evidence to support their claims). The development of FATF’s system could undermine crypto transfers across borders.
Pseudonymous (and, in some cases, anonymous) transfers have been a calling card for cryptocurrencies. They have also largely remained outside regulatory purview. The new system dilutes their identity.
While they will spur mainstream adoption of cryptocurrencies and bring order to the ecosystem, transfers that divulge user identity and transaction data will disappoint crypto purists. To understand this, it is necessary to understand how AML software works. It tilters customer data and classifies it based on level of suspicion. Suspicious activity and transfers are investigated by firms. In the US and Canada, financial services firms are required to report all transactions above $10,000. US authorities review approximately five million flagged transactions each year.