Although most crypto users welcome the current regulations for the digital asset market, it has not always been smooth sailing when governments and regulators face compliance-related challenges. Although more regulations have helped the industry develop and even increased the confidence of users and investors, data privacy issues have emerged in the past few years. Although cryptocurrencies need to be regulated, is the trade-off too steep?
In the recently released Unchained podcast, CipherTrace CEO Dave Jevans detailed that more regulations may also have unexpected consequences on the digital asset market. Jevans believes that in terms of FATF’s travel rules and other AML-related regulations, one of the biggest challenges is user data privacy. Jevans also pointed out that another major focus is on private wallets. He said,
“I think the second one is going to be that everyone will just move everything to private wallets. Why would you do [virtual assets service provider] VASP to VASP transactions? Your transaction fee will be doubled, but you know, move everything to a private wallet and then send it. And then none of this makes any sense.”
A recent report by CipherTrace had highlighted how the industry is moving towards adopting and implementing FATF’s revised standards with regard to virtual assets service providers. It had noted,
“Within jurisdictions that have begun licensing and registration procedures for VASPs, most reported less than ten registered VASPs, while a small minority of jurisdictions reporting over 100 VASPs. Over 1000 registered or licensed VASPs were reported from 20 jurisdictions alone.”
However, a key issue is that the implementation of such regulations is targeted at specific regions. Certain countries and regulatory agencies may have different standards for compliance and how to enforce travel rules in the digital asset market. Jevans believes that this will lead to a “sunrise problem,” that is, different countries have different ways of implementing their compliance systems. He said,
“If there’s enforcement in one country, let’s say Singapore or the United States decides to enforce strictly. Does that mean that France hasn’t implemented it you can’t send money there. So does that create a restriction in the, in the market and you no longer have global liquidity? So none of these in my view are positive.”