Back in June, the Financial Action Task Force (FATF) adopted new rules that change the way cryptocurrency exchanges interact with regulators.
These new rules insist that crypto-related companies send over customer data such as names and account information to regulatory groups that receive such transactions.
This way, the government will have a much easier time tracking suspicious, significant transactions.
However, this is much easier said than done, as many crypto exchanges and related businesses don’t currently have systems in place to account for such information.
The result is a mad scramble as companies struggle to adapt to the new rules.
This rule on reporting financial transaction data – called the “travel rule” – first put in place in 1996 and applied traditional financial organizations.
The rule requires that applicable businesses – which now includes crypto-related businesses – to report any transaction of $1,000 or more to other financial institutions.
In addition, the FATF oversees examinations of anti-money-laundering laws and rules in different countries around the world – over 37 regions all part of the organization.
If a space can’t properly comply with the rules, it may not be able to participate in the FATF’s financial network.
According to Jeff Horowitz, the chief compliance officer at the San Francisco-based Coinbase cryptocurrency exchange, the problems go even further than data transferring.
There’s also the question of security, as it’s possible that transmitted financial data could end up in the hands of someone that it isn’t supposed to.
The FATF is giving countries and businesses twelve months from the date of the new regulations going into effect to get their compliance systems in place, at which time they will conduct an extensive review the progress made.
Because there currently is no secure, standardized way for companies to report on customer data, and due to the fact that governments are basically saying “here are the rules, you figure it out,” experts are saying it could be months before companies catch up.
Teana Baker-Taylor, the executive director of Global Digital Finance claims that “The industry is looking at what technical solutions exist, and what should the standards be?”
Part of the problem, too, is that regulators seem to be taking a “trying to fit a square peg into a round hole” approach. to the issue.
Although compliance leaders meet regularly to work toward finding a solution, there isn’t much progress being made as of now. In fact, some countries – like India – are even considering banning cryptocurrencies entirely.
However, a solution isn’t impossible. Horowitz believes that the problem can be solved, although the method to do so does not currently exist.
Horowitz states that regulatory compliance is one of his top priorities and notes that Coinbase is working with other exchanges and businesses to develop a working compliance plan.
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