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.
The country wants to use a new law to ensure that crypto-tokens and other virtual currencies are formally classified as digital assets.
With South Korea, one of the crypto-friendliest countries now wants to create a foundation for the business of cryptocurrency companies. As officially reported in the English language version of the Korea JoongAng daily newspaper, the National Policy Committee of the South Korean National Assembly has passed a bill to regulate cryptocurrencies in the country. The law creates a framework by which crypto-tokens and other virtual currencies are formally classified as digital assets.
Crypt currency exchanges in South Korea have not been classified as financial institutions, but as information providers. Therefore, they fall under the jurisdiction of the Korean Ministry of Science and not the Korean Financial Supervisory Authority. After accusing the government of not doing enough to prevent hacking damage, the Financial Supervisory Service (FSS) said it would broaden its accounting practice to include the country's large crypto currency exchanges.
The bill also sets rules for companies related to cryptocurrencies and other virtual currencies. All companies that hold or trade in virtual currencies must now receive an ISMS (Information Security Management System) certificate from the Korea Internet and Security Agency (KISA) and become a company with digital assets at the Financial Intelligence Unit (FIU) to register.
In addition, cryptocurrency companies must ensure that their anti-money laundering systems comply with the best practices from the International Financial Services Task Force (FATF). Companies that do not comply with these standards will be punished and serious legal measures will be taken against them. After the South Korean constitutional process, it takes about a year for the law to come into force.
This is not the first time that the South Korean government has attempted to regulate the crypto space within its borders. Last year, the authorities banned the anonymous cryptocurrency trade and later introduced new anti-money laundering standards. South Korea is one of the few countries in the world that has turned out to be cryptocurrency-friendly - at a time when most nations are still grappling with the notion of decentralized ledger technology.
According to the recent report of the Central Bank of South Korea, the South Korean stock exchanges have approximately $ 1.9 billion of cryptocurrencies in their accounts.