Crypto Economy

Crypto Economy May See a Tsunami of Regulation

There is a concerning trend of cross-border cryptocurrency payments leaving the US exchanges and entering offshore yet untraceable wallets, reveals a CipherTrace report.

“A tsunami tough new global anti-money laundering (AML) and Counter Terror Financing (CTF) regulations will roll over the crypto landscape in the coming year.”

In the 12 months ending March 2019, cryptocurrency transfers from the US cryptocurrency exchanges to offshore exchanges grew 46% as compared to the same period two years ago. Once such payments reach exchanges and wallets in other parts of the world, they fall off the radar of the US authorities. It outlines the major regulatory blind spot for the United States.

The 1st Quarter of 2019 Cryptocurrency Anti-Money Laundering Report touched on the recent Bitfinex/Tether controversy in which NYAG’s office revealed what they allegedly say is a fraud involving the loss of $850 million. Though the story is still under the development, CipherTrace notes that the source of loss was a Panamanian payment processor which QuadrigaCX also used extensively – Crypto Capital.

Further details are documented in the report of the countries like Iran leveraging digital currency to circumvent global monetary sanctions. SWIFT, in November 2018, banned some Iranian banks from access to its broadly used cross-border payment services. Ultimately, Iran launched its own sovereign digital currency this January in what appears to be a quick sanction sidestep.

Exchange thefts, as well as exit scams, totalled over $356 million in the first Quarter of this year. All of that money will be washed, and in case the trend continues, then we can expect a near-billion-dollar money laundering issue. New and innovative money laundering techniques have kept the regulators on their toes.

Currently, a new wave of privacy coins is threatening to escalate the issue further. In preparation for a potential resurgence, world’s regulators are promptly deploying regulatory guidelines, while adopting blockchain forensic programs as well as demanding AML and CTF compliance.

Dave Jevans, the CEO of CipherTrace, said –

“Although this report punctuates some of the negative occurrences within the crypto ecosystem, it is important to view these illuminations as markers for improvements.”

He added –

“This is the wake-up call crypto needs. Cryptocurrency is maturing, and that means having a few growing pains. Once we identify problems, we can find solutions. Cryptocurrency projects must grow up before they can move forward.”