Every year that we distance ourselves a little further from Satoshi Nakomoto’s whitepaper, cryptocurrencies are becoming more popular than ever, breaking more barriers, not only in terms of enthusiasm, but in terms of general acceptance. From non-fungible tokens (NFTs) to the Metaverse, 2021 was the year of cryptocurrencies, even after a decade in which almost every other year the same could be said.
However, despite the excitement and excitement, We must not ignore the fact that there are still fundamental issues to be resolved before crypto becomes the dominant “kingdom currency” around the world, along with the main structure of the next industrial revolution.. These issues include protection against money laundering (AML), knowledge of the customer (KYC) and the fight against the financing of terrorism (CFT), which ensure that cryptocurrencies remain a responsible and stable payment option without excess regulation.
We are already seeing these kinds of issues with nations that are the most enthusiastic about adopting cryptocurrencies, whether through CBDCs or other means.. El Salvador has made headlines for making Bitcoin (BTC) legal tender and for building a tax-free, Bitcoin-financed city under a volcano, but the country has had its AML / KYC / CFT issues, such as when identity thieves compromised the Chivo Bitcoin wallet, the mechanism through which El Salvador gave its citizens a “Bitcoin stimulus”.
Nor is it just about public entities. The rise of NFTs in 2021 has created a whole new need and emphasis on KYC / AML in a space dominated by eye-catching numbers.. OpenSea does not have a KYC collection or AML / CFT control, which means it is susceptible to being compromised.
To prevent crime and fraud from killing cryptocurrencies in its infancy, or at least at this stage of development, the industry needs to start taking proactive steps to self-create policies and self-regulate immediately. If this is not done, the task will be left to the same kind of clueless government officials who brought us the cryptocurrency provisions of the US Infrastructure Act.
The emerging compliance-as-a-service
Although NFT platforms are beginning to integrate the fight against money laundering, the control of suspicious transactions and the fight against the financing of terrorism, the rule is by no means consistent. “Old guard” auctioneers such as Christie’s and Sotheby’s refuse to list these standards or describe them in detail.. OpenSea, perhaps the main driver of the NFT boom, has so far resisted incorporating any kind of AML / KYC into the platform itself.
As the popularity of NFTs continues to grow, like popular computer operating systems, these platforms will attract more hackers and identity thieves. The mainstream media proclaim with great fanfare that “NFT scammers are here.” If 2021 was the year that NFTs amounted to the best use case we’ve had so far for cryptocurrencies, then 2022 will be a year that hackers and scammers will try to fully exploit that popularity..
Given the reluctance of NFT’s own platforms to tackle this problem, other technology platforms must take over.. These platforms can help NFT platforms develop stricter protocols and more detailed AML and KYC requirements before governments come up with backward and draconian regulations. Developing “Compliance-as-a-Service” as an industry-internal solution will not only prevent fraud, but will drive even greater enthusiasm and commitment from individuals, financial institutions, and governments. who still see crypto as the irresponsible corner of the financial universe.
Businesses should be part of the growing compliance-as-a-service industry, but tackling the growing threat from NFT and blockchain scammers will not be enough., especially when entire countries are looking to blockchains as national solutions.
Clear AML / KYC Rules Equal To True Crypto Viability
Of course, some in the crypto community would rather not encourage or even acknowledge regulations of any kind, but that tactic and philosophy is simply not realistic or reasonable.. The problems with El Salvador’s Chivo wallet demonstrated how quickly identity and security issues can derail even the best-intentioned cryptocurrency launches. Countries continue to pursue KYC best practices as part of expanding crypto operations. Sri Lanka has conducted a KYC proof of concept. HSBC has worked with Dubai on its KYC.
Meanwhile, in the United States, the Financial Crime Surveillance Network (FinCEN) issued its first AML / CFT priorities mid-year.. These priorities include corruption, cybercrime, support for terrorism, fraud, transnational crime, drug and human trafficking, and financing of weapons of mass destruction.
Although different countries are at different stages of the AML / KYC / CFT process, some clear guidelines are emerging. With 195 different countries, yes, there may be 195 different rules to regulate cryptos. However, after several years of guidelines, regulations and sanctions, the industry has more than enough parameters to start tailoring AML / KYC / CFT solutions and supervision in different jurisdictions. This is just all the more reason why the industry itself should be proactive, developing a comprehensive, easily understandable and internationally recognized standard that is easy to adopt in as many jurisdictions as possible.
What the industry cannot do is allow the blockchain to be riddled with the same kinds of “wild west” traps that characterize the internet.. Yes, the popularity of the internet is indisputable, but that has come with the sacrifice not only of privacy, but of the primacy of truth and healthy communication between people. That means build a new identity model, based on the blockchain trust system, but also a model flexible enough to meet reasonable AML, KYC and CFT standards.
This article does not contain investment advice or recommendations. All investing and trading involves risk, and readers should do their own research when making a decision.
The views, thoughts and opinions expressed here are solely those of the author and do not necessarily reflect or represent the views and opinions of Cointelegraph.
Jonathan Camilleri Bowman is the CEO of Sekuritance, a multidimensional RegTech ecosystem that provides regulatory compliance, regulatory transaction monitoring, and identity management to business individuals and corporations.
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