As many countries, entities and even individuals face international sanctions, the cryptocurrency sector is trying to find its place among the increasing regulations.
Digital currencies have often been mentioned as a way for those subject to sanctions to divert them, as in the recent case of Russia. In these cases, exchanges and other industry players need to know where they stand in terms of regulatory compliance.
A Harvard research even suggests that central banks may use Bitcoin (BTC) to fight sanctions.
Speaking to Cointelegraph Editor-in-Chief Alex Cohen at the Israel Crypto Conference, Andrew Fierman, Chainalysis’ head of sanctions, said that sanctions are nuanced depending on the many factors surrounding the situation.
“When you look at countries like Iran and North Korea, from the US perspective, cryptocurrencies have indeed been widely sanctioned.”
He said that Russia is a bit of a “different story” as there are sanctions based on entities such as companies and individuals that have been sanctioned by the United States. Coupled with industry-based sanctions (energy, military, etc.), all of which create a murky tone around the situation.
“That has been one of the great challenges within the industry in general. Not only in cryptocurrencies, but also in traditional finance.”
However, Fierman said there are methods in which major players in the industry could avoid major headaches to the ecosystem.
“Proactively sanctioning entities and actors that are operating in ways that are detrimental to the ecosystem is an effective way to help prevent them from interacting with the ecosystem at all.”
Fierman went on to say that there are plenty of opportunities to stop illicit activity in the industry if the actors are working on the blockchain.
Fierman highlighted some recent cases of compliance by government entities such as the Office of Foreign Assets Control (OFAC). One of these was centralized exchange Kraken, which was fined hundreds of thousands of euros by OFAC, along with Bitfinex, which was fined even more.
“In both cases, they really show a path for entities in space to take the right approach.”
According to the sanctions officer, one of the big trends in the industry has been IP blocking and continuous monitoring of IP activity. This not only takes into account the point of know-your-customer procedures to verify user identity, but also where users log in from to look for inconsistencies.
Forecasts suggest that cross-chain money laundering related to cryptocurrencies will reach $10 billion by 2025.
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