Despite the failures of several cryptocurrency exchanges last spring, including several platforms dedicated to creating or trading stablecoin, resistance to reasonable regulatory oversight remains strong.
The push against regulation continues even as institutions and wealthy individuals have begun buying crypto and traditional financial institutions have cautiously committed to offering cryptocurrency trading or custody.1
“On the one hand, we want to be a global crypto hub. On the other, we’re also very worried about our domestic population getting burned with this speculative asset class,” Piyush Gupta, chief executive of Singapore-based DBS, told the Financial Times in explaining the bank’s application for a Monetary Authority of Singapore license to trade cryptocurrency.2
In addition, celebrities are marketing crypto to retail investors. A number of these pitches came just prior to the big drop in crypto, reaping derision for several A-listers and at least one lawsuit.3
Early advocates promoted crypto as facilitating nearly instantaneous, low-cost, secure transactions AND financial inclusion. For some, these benefits were linked to the promise that transactions occurred without financial intermediaries or regulatory oversight.
But transactions are not instantaneous and can be costly to execute. Moreover, their volatility generally makes crypto unsuitable for anyone, let alone the unbanked, to use to buy groceries.
Even for institutional and high-net-worth investors, the enthusiasm for crypto as an alternative asset class seems unwarranted: Currently, bitcoin, ethereum and others are following the downward trajectory of the stock market but taking much bigger hits.
Given investor losses from volatility, failed products, fraud, hacker theft, plus the rise of crypto to launder money and fund terrorism—though still marginal compared to cash—this is no time to resist regulation designed to protect investors and prevent financial crime.
In an October 2021 guidance, the Financial Action Task Force (FATF) identified “jurisdictional arbitrage and the associated problem of non-compliant or weakly compliant VASPs [virtual asset service providers] and tools and methods to increase anonymity as the main trends in the VA [virtual assets] ML/TF [money laundering/terrorist financing] risk landscape. Illicit actors are taking advantage of poor CDD [customer due diligence] and screening processes within these VASPs for ML/TF purposes….”4
Preventing cryptocurrencies and other fintech vehicles from being used to launder money or finance terror is the focus of several stories in this issue of ACAMS Today, including pieces that detail the promise and perils of Web3, the value of geolocation tools for VASPs and the best anti-money laundering practices for fintechs.
The articles reflect how supporting regulators and law enforcement—in the oversight and policing of financial markets—is integral to the work ACAMS members do. ACAMS will continue to provide, in these pages, at ACAMS moneylaundering.com and through our conferences, vehicles for best anti-financial crime practices and insight into the scope of global regulation necessary to achieve them, not least for the nascent cryptocurrency and fintech industry.
Kieran Beer, CAMS
Chief Analyst, Director of Editorial Content
Follow me on Twitter: @KieranBeer
“Financial Crime Matters with Kieran Beer”
- Ekin Genç, “How Are Institutions and Companies Investing in Crypto?” Coin Desk, June 24, 2022, https://www.coindesk.com/learn/how-are-institutions-and-companies-investing-in-crypto/
- “Singapore’s biggest bank DBS backs crypto despite market slump,” Financial Times, September 05, 2022, https://www.ft.com/content/e3f9ef29-3792-4937-abda-ddb1d19f25bb
- Alexandra Semenova, “Here are the celebrities promoting crypto — even as concerns around scams mount,” Yahoo Finance, https://www.aol.com/finance/celebrities-promoting-crypto-even-concerns-142036917.html
- “Updated Guidance for a Risk-based Approach: Virtual Assets and Virtual Asset Service Providers,” Financial Action Task Force, 2021, https://www.fatf-gafi.org/media/fatf/documents/recommendations/Updated-Guidance-VA-VASP.pdf
