The Swiss financial regulator will in future ban anonymous transactions of bitcoins and other virtual currencies. It is causing a negative excitement in the crypto industry.
According to their name and their intention, virtual currencies like Bitcoin should be "cryptic" - that is, secret, of unclear origin. Therefore, they are also a popular means of money laundering and covert financing. The Swiss financial regulator (Finma) now wants to put an end to this in its area of responsibility and requires an "address slip" for every transaction. This is making big waves in the crypto industry.
Although the announcement already took place on August 26, 2019, it is only now really being noticed by the players in this sector and is provoking some violent reactions. Critics fear a paradigm shift, speak of the "end of crypto payments", a "technology-discriminating practice" and a location disadvantage for the Swiss banking center.
In fact, the federal supervisory authority now applies the same "Travel Rule" to transactions with cryptocurrencies that already applies to banks' normal payment transactions and that makes binding information on the sender and beneficiary for each order. This is intended to enable verification and comparison with sanction lists. The introduction of this so-called "Travel Rule" is not an invention of Finma, but essentially implements the guidelines agreed in June 2019 by the OECD working group "Financial Action Task Force on Money Laundering". The aim of the agreement is to better combat money laundering and terrorist financing.
So there are also more sober voices: According to the head of the blockchain department of management consultancy PwC, Daniel Diemers, this step corresponds to "the general weather situation". The discussions of the International Monetary Fund, the Bank for International Settlements, the ECB and the European Financial Market Authority went in the same direction. After all, traditional banks are also not allowed to process anonymous payments. However, it is still unclear how the new regulation can best be implemented technically for Switzerland. The travel data could be given in the blockchain or noted centrally and then linked to the chain.
In terms of secrecy, token suisse founder and CHIEF executive Alain Kurz pours plenty of water into the wine, because "although many investors believe that bitcoin can be paid anonymously, the opposite is true". This guarantee would only be provided by private coins such as the Monero. With this digital money, most payments would now be processed on the infamous darknet.
Which technical solutions the financial service providers offer to implement the new Finma regulation is still unclear. Bitcoin Suisse has set up an open discussion platform at openvasp.org. What is certain is that the costs will increase - however, according to Daniel Diemers, crypto transactions should remain cheaper in the future than traditional payments.
In China, the Bitcoin trade has already been pushed into the underground - the Hong Kong protests are partly financed with Bitcoin. The Russian central bank is now examining how it they are able to censor BTC.
Even though Russia and China are not directly on the drip of the US dollar, the ruble and yuan are based on the same Fiat principle. And so these two nations have an immense interest in censoring free decentralized alternatives like Bitcoin.
In Russia it is being discussed how Bitcoin could be banned. Especially for trade against goods and services a censorship is considered, which is already well advanced. However, there is still a ban on the official definition that applies to the BTC in Russia. Because Cryptocoins are not yet clearly classified as "Money Substitute" - only when this is done, a ban can be made.
But how successful can a ban really be? There is also an active trade in Bitcoin in China. Although this is officially banned there, there are few opportunities for the state to ban trade if it is done anonymously. The same problem will also worry Russia.
As I did not find any advantages of cryptocurrencies, I have been asking a few days ago "Cryptocurrencies where are the advantages?"
I got answers, which are not really advantages, like:
Sorry, but as soon as you buy something, your anonymity gets lost.
To buy things of daily use, the transaction fees are simply too high.
When buying expensive goods, you need proof of purchase. That's usually an invoice on which your name and address has to be written.
If you buy something online, the seller needs your address so that he can write an invoice and knows where to send the goods.
If you meet the seller in person, then you are able to save the transaction fees by paying cash.
If you like to take a wallet from uphold.com you are not anonymous too. uphold.com is even breaking the data protection law from the most countries
- Transaction Speed
The transaction time of Bitcoins can take up to one hour if you have enough funds in your wallet. As soon you need to transfer some funds from your bank account using an exchange service, you can add at least an additional day. If you find an exchange service, which is accepting credit cards, then you are able to speed it up, but you have to pay extra fees. In this case you can save these extra fees by paying with your credit card directly and the transaction time takes only a few seconds.
- Investment - Cryptocurrencies will tend to increase their value on the long run
Sorry, but as soon as some big players in the IT industry, like Google, Mark Zuckerberg or Microsoft, have the idea to create their own international payment system, the value of the existing cryptocurrencies will fall faster than a stone. Also Bitcoin will exist thereafter only as niche currency or will exist only in the memory from some people.
Capital goods have a long lasting or increasing value like precious metals, diamonds and land or something similar. Cryptocurrencies are based purely on ideal values and are not backed up by long lasting values.
- Better security
I don't see any better security. I see even a higher risk with cryptocurrencies. If you are using an online wallet, then the provider can have a data breach. If you have a wallet on your local device, then a trojan or virus can steal your values.
Here is an example about a hack: Monero Malware Warning
Warning Monero users: If you downloaded Monero in the past 24 hours you may have installed malware. Monero's official website served compromised binaries for at least 30 minutes during the past 24 hours. Investigations are ongoing.
Other sites are promoting additional:
- Cutting out the middle-man
You are replacing only the middle-man (your local trusted bank) with a company or service abroad, because you need for transferring amounts from one wallet to another a service. To file a case against your local bank is much cheaper and easier than to file a case against a company abroad.
- Access to everyone in every market
Sorry, but you have to search for someone who is accepting cryptocurrencies on the market. As it is very hard to find any advantages beside speculation is it very hard to convince merchants accepting cryptocurrencies instead of traditional money.
The site Finjan Cybersecurity tells you that there are currently over 1200 unique cryptocurrencies or altcoins in circulation worldwide. That are much more than traditional currencies are getting found at the whole world. Additional you'l find at the site Dead Coins 1818 coins listed, which have already no value.
So where do you like to find any merchant, who is accepting exactly your cryptocurrency?
In summary, I come to the opinion that cryptocurrencies are nothing else than a object of speculation with a very high risk and useless for any other purpose.
Please correct me for the case I'm wrong in my opinion or views.