3 - 5 minute read
A member of the U.S. Commodity Futures Trading Commission (CFTC) is urging for stricter governmental and industry controls on digital assets to curtail risks to national security. According to a recent Reuters report, CFTC commissioner Christy Goldsmith Romero has called for the anonymity of crypto transactions to be curtailed to prevent illicit activity. Romero emphasized that criminals are increasingly using crypto to fund cybercrimes, and it’s essential for governments and the industry to address what makes crypto so attractive to illicit finance, and that is the allure of anonymity.
The US recently banned currency mixer Tornado Cash, which pools together funds from different sources, mixes them up, and then redistributes them to increase anonymity, citing national security concerns. The US Congress is also considering new laws to address anonymity in digital assets. Romero stated that it’s possible for all crypto companies to distance themselves from mixers and anonymity-enhancing technology while still providing customers financial privacy.
The Financial Stability Board (FSB) is working on final global recommendations for regulations of crypto, which would be issued “soon,” according to Reuters. The report highlights how the legacy financial system continues to lead the way when it comes to money laundering. Over a trillion dollars are illicitly funneled through the traditional banking system every 365 days, according to a report published by the United Nations Office on Drugs and Crime.
However, the crypto industry is not immune to money laundering either. A recent analysis from Forbes found that banking giants including Capital One and Deutsche Bank were fined a total of $2.7 billion in 2021 for committing anti-money laundering violations. As for the crypto industry, a January report from Chainalysis found that money laundering accounted for less than one percent of all crypto transactions in 2021.
Despite this, the crypto industry is still viewed as a potential threat to national security, and the anonymity of crypto transactions is a significant concern. Romero’s call for tighter controls on digital assets is a reminder that regulatory changes in the industry are imminent. Traders should be aware of the potential impact these regulations could have on the market and take appropriate steps to manage risks.
The Bottom Line
he call for the anonymity of crypto transactions to be curtailed is not new, but it is gaining momentum. Traders should monitor regulatory changes in the industry closely, as these could have significant implications for the market. While the crypto industry is not immune to money laundering, the focus on anonymity should not be a reason to dismiss the potential benefits of digital assets. The industry must find ways to provide customers with financial privacy while curtailing illicit activity. The bottom line is that traders must remain vigilant and adapt to the changing regulatory landscape.