- The last year 2023 witnessed a massive crackdown on the crypto sector in the wake of violating the AML rules.
- In Feb 2024, IDnow joined a consortium with IOTA Foundation, walt.id, SPYCE.5, and Bloom Labs to ensure CASPs and self-hosted wallets comply with EU regulations.
One of the biggest challenges for the firms operating in the crypto sector today is handling regulations related to the anti-money laundering (AML) rules. Financial Times analysis reveals that crypto and digital payment firms incurred hefty fines totaling $5.8 billion, attributed to various infractions such as non-compliance with anti-money laundering protocols and lapses in adhering to sanctions and other financial regulations.
The substantial portion of the colossal $5.8 billion in fines arose from the deliberate imposition of a hefty penalty of $4.3 billion on the cryptocurrency exchange Binance. Speaking on this, Attorney General Merrick B. Garland said:
“Binance became the world’s largest cryptocurrency exchange in part because of the crimes it committed – now it is paying one of the largest corporate penalties in US history. The message here should be clear: using new technology to break the law does not make you a disruptor, it makes you a criminal”.
Throughout 2023, crypto firms faced a total of 11 fines, marking a significant jump from the average of just two fines per year over the past five years. Similarly, payments firms saw a substantial increase in fines, totaling 27, compared to their average of five fines annually from 2018 to 2022. Interestingly, the majority of fines imposed on payments entities targeted fintech firms less than 20 years old.
2024 Could Be A Game-Changing Year For Crypto Regulations
The beginning of 2024 has brought some positive strides in crypto regulation, notably marked by the European Banking Authority’s (EBA) extension of guidelines on combating money laundering and terrorist financing to crypto asset service providers.
Additionally, significant progress was made as the European Council and European Parliament reached a provisional agreement to establish the Anti-Money Laundering Authority (AMLA). This new European authority will look after combating money laundering and terrorism financing. While technical negotiations are anticipated to continue for several months, the goal is to formally adopt the final agreement by 2024. Rayissa Armata, Director, Global Regulatory & Government Affairs at IDnow said:
“2024 may very well prove to be a watershed year for the crypto industry. It’s likely that the upcoming crypto regulations will have a positive impact and act as a stabilizing force, while the fines should serve as a deterrent and remind crypto firms that AML laws and regulations apply to them too”.
In February 2024, IDnow became part of a consortium comprising five partners, including the IOTA Foundation, walt.id, SPYCE.5, and Bloom Labs. Thier collective goal is to ensure compliance of Crypto Asset Service Providers (CASPs) and self-hosted wallets with the European Anti-Money-Laundering Regulation and the Transfer of Funds Regulation (TFR). For further insights into TFR, you can refer to our blog titled ‘EU extends TFR to crypto, requiring KYC for all crypto transactions.’
With #AML fines in #crypto at an all-time high, our consortium with @iota, @bloomwalletio, @walt_id and @SPYCE_5 could not come at a better time.
Read more about the pivotal role of regulation and technological innovation in steadying the crypto ship:https://t.co/hDH9c0O0GK pic.twitter.com/8PHzGxFNzd
— IDnow (@IDnowGroup) February 19, 2024
One of the significant challenges facing CASPs in meeting these new regulations is ensuring compliance with GDPR. This poses a challenge because personal identifiable information (PII) should not be stored on blockchains or Distributed Ledger Technologies (DLT).
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