News: US regulator calls for an end to anonymity in cryptocurrency to prevent illicit finance

US regulator warns anonymity in cryptocurrency fuels illegal activities, calls for compliance with money laundering laws.

Cryptocurrency is once again under the microscope as a top U.S. regulatory official has called for an end to anonymity in the industry. Christy Goldsmith Romero, a commissioner at the U.S. Commodity Futures Trading Commission, has highlighted the risks that anonymity poses to national security and the finance industry. Speaking at the City Week conference in London, Romero stated that cryptocurrencies were being used to finance cybercrime, which has negatively affected individuals, companies, hospitals, and critical infrastructure.

The use of "mixers" or software tools that anonymize users is of particular concern, as they enable cryptocurrencies to be pooled and scrambled from thousands of addresses. This makes it difficult to track illegal activities such as money laundering and terrorist financing, which can have devastating consequences for societies around the world.

Romero believes that it is essential for governments and the industry to address the issue of anonymity in cryptocurrency. She suggests that legally compliant crypto companies should not use such tools and that they should show they have internal controls in place to prevent money laundering and terrorist financing.

It is worth noting that there are already laws in place that seek to address these issues. Last year, the U.S. imposed sanctions on virtual currency mixer Tornado Cash, alleging that it helped hackers, including those from North Korea, launder proceeds from cybercrimes.

Crypto companies need to prioritize financial privacy while still distancing themselves from mixers and anonymity-enhancing technology. This is because anonymity is a key feature that makes crypto attractive to illicit finance. Therefore, it is crucial to strike a balance between privacy and transparency to prevent any future misuse of cryptocurrency.

Regulators in different parts of the world are working to get their arms around crypto before global norms are agreed and introduced for a borderless sector. John Schindler, Secretary General of the Financial Stability Board (FSB), the G20's coordinator for financial rules, revealed that the FSB would soon issue the final version of recommendations for regulating crypto assets.

Schindler acknowledged that the industry is growing quickly, and regulators need to catch up with the innovation. He also pointed out that different people are doing different things, and firms are picking and choosing where to set up shop. This means that regulations need to be implemented uniformly to prevent any jurisdictional arbitrage, where companies flock to jurisdictions with less stringent regulations.

In conclusion, the call for the end of anonymity in cryptocurrency is a crucial step in ensuring that the industry is transparent and compliant with the law. Cryptocurrencies have been used to finance illegal activities, and it is time for the industry to take responsibility and prevent any further misuse. While there are challenges to implementing regulations in a borderless sector, it is vital for regulators to collaborate and agree on global norms to ensure a level playing field for all participants.

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