One of the main themes to be discussed at the G-20 Financial Ministers and Central Governors Meeting
this weekend has to do with money laundering and cryptocurrency. What
kind of agreement would be a surprise? Even for the purpose of
introducing Anti-Money Laundering (AML), should we allow our financial
privacy to be compromised? Alexander Zaidelson, the CEO of Beam, shared
his views with Cointelegraph.
A new agreement on crypto and AML?
Jiji
Press, a major Japanese publication, recently reported that there will
be “a new kind of agreement as to cryptocurrency and AML/CFT.“ But for
blockchain analysis firm Chainalysis, which has “engaged directly with
global regulators,” it is surprising if they agree on something new.
Jesse Spiro, head of policy at Chainalysis, expects Financial Action Task Force (FATF) guidance, which will be published later this month, to reflect the draft guidance that they issued in March this year.
“It would surprise us if FATF substantially modified the pre-existing draft in any major substantive way.”
He summarized the FATF draft as an agreement in the industry that “certain standards, including proper Know Your Customer (KYC),
enhanced due diligence (EDD), transaction monitoring, and suspicious
activity reporting are necessary to combat money laundering”
The Financial Action Task Force (FATF) is an intergovernmental body formed to fight money laundering and combat the financing of terrorism. In a previous G-20 meeting, the G-20 said that they would “commit to implement the FATF standards as they apply to crypto-assets.”
An official self-regulatory organization in the host country watches the G-20 closely
The Japan Virtual Currency Exchange Association (JVCEA) refrained from predicting the outcome of the G-20 summit but told Cointelegraph that it would be ready for compliance:
“We
are watching global movements as to AML/CFT very closely. We supervise
our members, Japanese crypto exchanges to make sure that they comply
with them.”
According to Alexander Zaidelson, the CEO
of a privacy coin-centered Beam, the governments “may eventually
strengthen the regulatory scrutiny to on- and off-ramps, i.e. places
where cryptocurrency can be converted into Fiat currency, mostly
exchanges” He also added that there also may be an “attack” on
unregulated exchanges.
Beam is known as a privacy coin that adopts a protocol called MimbleWimble, which seeks to improve both privacy
and scalability at the same time. When asked if he is concerned that
the G-20 might somehow ban anonymous coins, Zaidelson answered:
“I don’t think it is possible to ban anonymous coins, and the regulators understand it.”
He continued:
“I
think that a balance should be found between privacy and compliance,
where people can choose the level of compliance that works for them. It
is similar to how cash works today - private people do not need to
report cash transactions, but businesses do.”
Although
it is possible that the regulators could make it difficult to convert
fully anonymous coins to fiat, Zaidelson argues that privacy coins’
opt-in compliance can deal with that case.
Money laundering, Privacy, and Public Interest
“I
think that privacy is a basic human right,” according to Zaidelson,
which he thinks is something to keep in mind when talking about money
laundering. For him, it is not acceptable if the regulators have all
financial transactions available for review at any given moment:
“It
is not possible to check every PC and every mobile phone for the
presence of a crypto wallet. It is not possible to block the Internet.
Instead of engaging in a futile fight against anonymous cryptocurrency,
the regulators should work together with the developers and find ways to
make them a part of the existing ecosystem.”
Spiro
of Chainalysis thinks of the balance between money laundering and
privacy in terms of “public interest and safety.” He went on to say:
“For example, the European GDPR laws, which were enacted to protect privacy, have clear rules
that outline when the transmission of personal data warranted,
including if it is ‘in the public interest,’ or necessary to protect the
public.”
Spiro thinks a similar criterion should be
applied to cryptocurrency. He sees the merits of “cryptocurrency
compliance best practices like KYC and blockchain analysis” in
“detecting and preventing illicit activities such as child exploitation,
human trafficking, narcotics trafficking, and terrorism.”
At the
same time, he makes sure that Chainalysis does not collect any
personally identifiable information from exchanges. What they can do
instead is know “a particular address belongs to a customer at that
exchange, not who the customer is”
It might be worthwhile checking
what the G-20 agreement this weekend might imply for the balance
between privacy and money laundering.
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