Impact of KYC/AML Requirements on Crypto Industry, Analyzed by CoolBitX Business Development Head
Tom Maxon, Head of US Operations and Business Development at CoolBitX, a Taipei-based firm focused on providing secure and easy-to-use blockchain-based solutions, has argued that FATFs recent recommendation on the regulation of the crypto industry is an undeniably positive development for the industry.
New FATF Rules May Be Avenue to Mass Adoption of Cryptoassets
On June 21, 2019, the Financial Action Task Force (FATF) announced that virtual asset service providers (VASPs) - including crypto exchanges - must share customer details with each other when funds are being transferred from one platform to another.
According to Maxon, the new FATF rules may be an avenue to mass adoption of blockchain-based digital assets. In an exclusive interview with CryptoGlobe, Maxon also shared his views and insights about applying know-your-customer (KYC) and anti-money laundering (AML) laws to cryptocurrency transactions.
CryptoGlobe: What are the pros and cons of strictly implementing KYC/AML across all centralized exchanges?
Tom Maxon: Lets first talk about the disadvantages of collecting this information:
1. How can each exchange offer the same standard of KYC collection?
If there are uneven standards, then it would be difficult to trust the integrity of cross-exchange transaction. Merely accepting dirty bitcoin could be highly problematic for exchanges trying to create a good name within their regulatory jurisdictions. Perhaps the logic of you are only as strong as your weakest link applies here.
2. How much of a barrier to entry does KYC bring for the unbanked?
Many people entered the virtual asset space because of the promise that bitcoin had on delivering financial inclusion across the global south. Does comprehensive KYC slow adoption due to friction of onboarding onto platforms? Most definitely. Does virtual asset platform KYC bring the same problems that banks have had with onboarding the unbanked? Probably.
While these are critical disadvantages, not having KYC/AML programs may be the harbinger of the demise for virtual assets. It boils down to trust: while much of the engineering infrastructure in the space has been designed to remove trust from the movement of digital money (for an example see the concept of trustless), most of the activity in the space occurs on human-built institutions like exchanges, or even on human peer-to-peer wallets.
This is not a controversial statement; its a truism that many exchanges are not a safe place to store valuable assets. Phishing scams have ruined trust in many online wallets. Both of these issues have resulted in the widespread adoption of unhosted wallets.
Also, how do you know the address you see is the address of the person you want t ...