Cryptocurrencies need to be reigned in by proper regulations, or risk fuelling widespread criminality and malfeasance, claims the Financial Action Task Force, a global anti-money laundering watchdog, which published a new report on the subject Thursday.
Created in 1989, the FATF is an inter-governmental policymaking body that has helped create and promote financial crime regulations in countries throughout the world. While it can’t actually force anybody to do anything, FATF’s suggestions have largely helped guide reforms designed to crack down on money laundering, terrorism financing, and other bad stuff. FATF is comprised of some 37 member jurisdictions, meaning it has considerable sway in the global community.
Appropriately, the group has spent recent years drafting policy suggestions related to digital currencies. On Thursday, FATF published its latest report, showcasing recommendations designed to weed out criminality in the industry, including urging crypto platforms to do more to verify the identities of their users and to more regularly report suspicious activity to federal regulators. It’s all pretty dense stuff but the basic takeaway is this: regulate ASAP.
As such, the report seems like more writing on the wall for crypto enthusiasts who’ve hoped digital currency would remain the fraud-ridden “wild west” its always been. Recent moves by the Securities and Exchange Commission, the creation of a new team of “crypto cops” at the U.S. Justice Department, and ongoing discussions by the Biden administration about expanded oversight, all seem to show a push to stamp out crypto’s freewheeling ways.
Probably for good reason. While FATF’s new report optimistically asserts that, with proper regulations, cryptocurrency could have “many potential benefits,” it also notes that, unsurprisingly, the worst regions of the industry’s underbelly are hotbeds of unadulterated criminal bullshit:
The majority of VA-related [virtual asset] offences highlighted in the report focused on predicate or ML [money laundering] offences, but, criminals also made use of VAs to evade financial sanctions and to raise funds to support terrorism. The types of offences reported by jurisdictions include ML, the sale of controlled substances and other illegal items (including firearms), fraud, tax evasion, computer crimes (e.g. cyberattacks resulting in thefts and ransomware), child exploitation, human trafficking, sanctions evasion, and TF [terrorist financing].
The report takes a fairly even-handed look at the industry as a whole, honing in with particular focus on decentralized finance (DeFi), the crypto realm dedicated to replicating the functions of traditional banking and finance like trade and lending. In real-world terms, what this means is platforms that deploy automated software designed to negotiate financial transactions without third-party intermediaries. DeFi products and services have exploded in popularity over the last several years, despite being linked to ongoing fraud, cyberattacks, and massive financial loss.
However, FATF notes that just because these companies call themselves “decentralized,” it does not mean that they, in fact, are.
“It seems quite common for DeFi arrangements to call themselves decentralized when they actually include a person with control or sufficient influence,” the report notes.
In other words, someone’s still in control of your money — it’s just not a federally regulated financial institution or a legally liable banking professional. Instead, it’s some person on the internet. As a result, FATF suggests that many DeFi entities should be subject to many of the traditional legal strictures that “centralised” entities are.
The report also regurgitates the largely-held belief that crypto has helped fuel the increasingly unhinged ransomware underworld: “VAs are a vital tool for ransomware actors, without which their underlying crime would be much harder to monetise. This makes effective and consistent implementation of the FATF Standards in this area all the more crucial.”
Let’s be honest: An industry without regulations isn’t much more than a giant fucking ripoff waiting to happen. Relevantly, time and time again cryptocurrency has proven that, for the most part, it’s really just an excuse for smart, skeezy rich people to take advantage of not-so-smart rich people, and, of course, for cybercriminals to have a field day.
In an ideal world, we wouldn’t be forced to deal with this totally made-up, ecologically-taxing problem that is now sapping money and resources away from real ones. But, the world being what it is, regulations seem like a good idea, yes? Yes.