From NFT to CBDC, cryptocurrencies must resolve compliance issues before regulators
Every year we are getting further and further away from Satoshi Nakamoto’s white paper, and cryptocurrencies have become more popular than ever before, breaking more barriers-not only pure enthusiasm, but also mainstream acceptance. From non-fungible tokens (NFT) to Metaverse, 2021 is the year of cryptocurrency, even after the same statement can be made almost every other year in the past ten years.
Despite the peak of enthusiasm and excitement, we should not ignore the fact that there are still some basic issues that need to be resolved before encryption can truly become the world’s leading “domain coin” and the backbone of the next domain. Industrial Revolution. The foremost among these issues is anti-money laundering (AML), know your customer (KYC), and counter-terrorism financing (CFT) protection to ensure that encryption remains a responsible and stable payment option without over-regulation.
We have seen this type of problem in the countries that are most keen to adopt cryptocurrencies, whether through CBDC or other means.Salvador Has made headlines Bitcoin (Bitcoin) Legal tender and establish a Bitcoin-funded zero-tax city under the volcano, but the country has problems in the AML/KYC/CFT field, such as when identity thieves invade the Chivo Bitcoin wallet, through this mechanism, El Salvador is a citizen Provided “Bitcoin Stimulus”.
Nor is it just a public entity. The NFT boom in 2021 has created a new demand and emphasis on KYC/AML in this space dominated by fancy characters. OpenSea does not perform KYC collection or AML/CFT screening, which means it is vulnerable to attacks.
In order to prevent crime and fraud from killing cryptocurrencies in its cribs or at least in its elementary schools, the industry must immediately begin to take active measures for self-regulation and self-regulation. If they do not, then the task will be given to the ignorant government officials who brought you the cryptocurrency provisions of the U.S. Infrastructure Act.
Emergency compliance as a service
Although the NFT platform has begun to integrate AML, KYC and CFT, the standards are not consistent.”Old Guard” auction houses such as Christie’s and Sotheby’s Refuse List these standards or describe them in detail. OpenSea may be the main driving force of the NFT boom and has so far refused to build any type of AML/KYC in the platform itself.
As the popularity of NFTs continues to soar, just like popular computer operating systems, these platforms will attract more hackers and identity thieves.Mainstream news media shouted Announce “NFT crooks are already here.” If 2021 is the year when NFT becomes our best use case for cryptocurrencies to date, then 2022 will be the year when hackers and crooks try to make the most of this popularity.
Since the NFT platform itself remains silent on solving this problem, other technology platforms have the responsibility to make up for this shortcoming. These platforms can help the NFT platform to formulate stricter agreements and more detailed AML and KYC requirements, so as to prevent the government from introducing backward and strict regulations. The development of “Compliance as a Service” as an internal industry solution can not only prevent fraud, but also inspire greater enthusiasm and participation from individuals, financial entities and governments. They still regard encryption as an irresponsible corner of the financial sector.
Companies should constitute a growing compliance-as-a-service sector, but it is not enough to respond to the growing threat of NFTs and blockchain scammers, especially when the entire country wants to use blockchain as a national solution.
A clear AML/KYC standard equals the real mainstream feasibility of encryption
Of course, some people in the crypto community would rather not encourage or even recognize any form of regulation, but such strategies and concepts are neither realistic nor reasonable. The issue with the Chivo wallet in El Salvador shows that even with the launch of a well-intentioned cryptocurrency, identity and security issues can be so rapid. As part of expanding encryption operations, countries continue to seek the best KYC practices.Sri Lanka KYC proof of concept has been completed. HSBC Worked with Dubai On its KYC.
At the same time, in the United States this year, the Financial Crime Enforcement Network (FinCEN) Issued the first AML/CFT priority this summer. These priorities include corruption, cybercrime, support for terrorism, fraud, transnational crime, drug and human trafficking, and financing of weapons of mass destruction.
Although different countries are at different stages in the AML/KYC/CFT process, some clear guidelines are emerging. There are 195 different countries, and yes, there may be 195 different encryption standards. However, after several years of guidelines, regulations and penalties, the industry has enough parameters to start customizing AML/KYC/CFT solutions and supervision across different jurisdictions. This is just another reason why the industry itself needs to be proactive and develop a comprehensive, easy-to-understand and internationally recognized standard that is easy to adopt in as many jurisdictions as possible.
What the industry cannot do is let the blockchain be plagued by the same type of “Wild West” traps that are characteristic of the Internet. Yes, the popularity of the Internet is indisputable, but it not only sacrifices privacy, but also sacrifices the primacy of truth and healthy communication between people. This means establishing a new identity model, a trustless system based on blockchain, and a sufficiently flexible model to meet the reasonable standards of AML, KYC and CFT.
This article does not contain investment advice or recommendations. Every investment and trading action involves risks, and readers should research on their own when making a decision.
The views, thoughts and opinions expressed here are only those of the author, and do not necessarily reflect or represent the views and opinions of Cointelegraph.
Jonathan Camilleri Bowman He is the CEO of Sekuritance, a multi-dimensional regulatory technology ecosystem that provides compliance, regulatory transaction monitoring, and identity management for individuals and businesses.