In our last article on this topic, we highlighted the oncoming battle that was brewing, as the regulatory establishment in one concerted effort was about to wage war against the anonymity feature of cryptos and blockchain technology. The Financial Action Task Force (FATF), a multi-government effort that develops recommendations for combating money laundering and financing of terrorism that’s followed by about 200 countries including the U.S., had recently produced a new set of guidelines for the digital world, which G20 finance ministers reviewed and approved earlier this month.
The most offensive section of these new rules, as seen from the perspective of executives in the crypto industry, attacks the anonymity nature of the Crypto-verse and proposes information needs that, despite being advised as to the infeasibility of their proposals, are unworkable, given the technicalities of today’s technology. In response to these “unworkable” regulations, which are scheduled to be adopted at a G20 meeting in Osaka, Japan, at the end of this week, crypto exchange executives rushed to arrange a sit down, being term a “V20 Summit”, with finance leaders and global policymakers to debate the controversial anti-anonymity data-gathering proposal.
In the rush, the crypto support team managed to create a logo for the meeting to be had, depicted in the above graphic, which requires a bit of explanation. The offending language of the new proposals states: “Global regulators [are] to ensure that “virtual asset service providers” – exchanges, custodian banks and others involved in the crypto markets – collect, hold and remit information on the counterparties to customers’ trades executed on their platforms, and make this available to law enforcement.” The term assigned to a crypto exchange is a “VASP”, or “Virtual Asset Service Provider”, thereby suggesting the prominent usage of the letter “V” going forward.
Over the past few years, regulators have gradually become more accepting and accommodating of the crypto revolution, but one thing still stands in the way of any additional consideration – the fact that nefarious elements of our society are perceived to be taking advantage of the anonymity provided by the intrinsic nature of a decentralized ledger infrastructure, i.e., the blockchain. Various reports have been created and used to support arguments on both sides of the issue, but the thought that crooks, tax evaders, terrorists, and all manner of other criminal protagonists are given a safe haven within the confines of the crypto-sphere is anathema to every regulator, government official, and law enforcement authority on the planet.
Progress on this front “can only enhance the credibility of cryptocurrencies and thereby increase awareness and the eventual adoption of cryptos on a mainstream basis”. Quite a bit of progress has been made since our last report on this the first-ever V20 Summit: “The summit will assemble VASPs, policy makers and crypto-asset industry participants to discuss the implications of the FATF proposed requirements and possible technical solutions to achieve the desired outcomes of the FATF while also protecting and promoting opportunities for business.”
Luckily, “Global legislators have voiced their support for a forthcoming summit.” The meeting will not be just a few players sitting around a small table: “Attendees will include G20 delegates, government agencies and policy makers, crypto exchanges and related service providers, notably representatives from the FATF as well as regulatory and regional legislative representatives.”
Although attendees will represent all quarters of the crypto global presence, there will be a heavy turnout of Asia related entities: “The V20 Summit will be hosted by the Singapore Cryptocurrency and Blockchain Industry Association (ACCESS) and the Australian Digital Commerce Association (ADCA); assisted by the Japanese Virtual Currency Exchange Association (JVCEA); and with the support of the British Blockchain & Frontier Technologies Association (BBFTA), the Korean Blockchain Association (KBCA), the Hong Kong Blockchain Association (HKBA), the FinTech Association of Hong Kong (FTAHK) and ACCESS Malaysia; and in cooperation with Global Digital Finance (GDF).”
It is amazing that such a major meeting could have been arranged in a few short weeks, let alone, have so many busy executives modify their schedules to attend on such short notice. The industry appears to be approaching this confab, as if it were the first round in armistice discussions to resolve major issues, before the need to shed any bloodshed. The leaders for the two hosting associations have set the tone of what is to follow:
- ACCESS Chairman Anson Zeall: “As an industry, we encourage the responsible adoption of regulation. That said, it is imperative that we unify our voices and engage the authorities in order to find the most appropriate and workable business solutions that meets the requirements of all those involved.”
- ADCA President Ronald M. Tucker: “With the G20 exploring how to maximize opportunities presented by blockchain technologies, and with businesses needing clarity and certainty around global regulatory frameworks, there is a clear need for an international dialogue to drive collaboration between government and industry to deliver a coordinated response to the updated standards proposed by the FATF.”
The envisioned mission for this first-ever V20 summit is clear: “To explore the evolution of possible technical solutions and prospective impact of the FATF’s forthcoming proposal on how participant nations should exercise oversight for the digital assets sector.” This meeting many only be the inaugural step towards an ongoing collaboration and cooperation of all participants in the Crypto-verse. The industry has come a long way in one decade, but resistance still persists in many quarters. More importantly, the market capitalization of the entire industry, including tokens, miners, exchanges, development efforts, and supporting companies, is estimated to be in excess $750 billion, a sizeable investment that needs to be protected at all costs.
Will the FATF and G20 attendees be open to modifying their rules and seeking better solutions? The original FATF report cited a statement from ex-FATF President, Roger Wilkins AO and former secretary Australian Department of the Attorney General, who has recognized that: “What we are hearing from industry is that the new rules may have the opposite effect to which they were intended, effectively forcing crypto transactions off the controlled platforms, which are currently one of the best avenues we have in gaining visibility over financial crime.”
Cryptocurrencies and the entire industry that supports them have come of age, but the time is ripe to clear the way for substantive growth, acceptance, and awareness for the road ahead. The first-ever V20 Summit is about to convene, with all the best intentions to enhance and protect what has already been developed at great cost.
As we reported recently: “KYC, AML, and CTF regulations are necessary conditions to shore up any “perceived weakness in the financial infrastructure”. Cryptocurrencies have tiptoed about these rules for its first decade of development. It is time to conform by working with regulators to develop a workable solution that satisfies the needs of all parties without imposing an undue cost burden on the entire crypto industry.”
The stage is now set where adversaries can finally discuss issues that matter for all parties going forward. Let’s hope that discussions to follow will be fruitful at this juncture in an ongoing process of cooperation. Stay tuned!