Cryptocurrency
Crypto Stablecoins Face Increasing Regulatory Scrutiny
As reported on Bloomberg, “Tether and other so-called cryptocurrency stablecoins have long flown under the radar of international regulators. That’s about to change. “The Financial Action Task Force, with members from about 200 countries who recommend ways to stop money laundering and the financing of terrorism, said in a report Tuesday that stablecoins need to comply […]
As reported on Bloomberg, “Tether and other so-called cryptocurrency stablecoins have long flown under the radar of international regulators. That’s about to change.
“The Financial Action Task Force, with members from about 200 countries who recommend ways to stop money laundering and the financing of terrorism, said in a report Tuesday that stablecoins need to comply with standards to guard against both practices.
“That means that exchanges and other entities supporting them will likely have to verify their users’ identities and comply with other policies on virtual assets such as Bitcoin that FATF set forth last year. The FATF report was prepared for G-20 finance ministers and central bank governors after the completion of a 12-month review.
“’My assumption would be that FATF will update guidance in relations to stablecoins in the near future,’ said Jesse Spiro, global head of policy and regulatory affairs for compliance technology provider Chainalysis.
“The new rules would also impose anti-money-laundering and know-your-customer requirements on stablecoin issuers like Tether as well as new endeavors such as Libra, an association started by Facebook Inc. to develop global stablecoins. Stablecoin providers, as well as exchanges that support the coins, would have to set up processes for monitoring transactions, investigations and regulatory filings. They’d also have to make sure that over-the-counter trading desks, which often buy stablecoins for clients, are compliant, Spiro said.
“’OTC desks, there’s been a lot of illicit activity that we’ve been able to follow through,’ said Spiro. ‘It’s something that regulators are going to be taking a long hard look at.’ Tether uses Chainalysis for a part of its compliance process, Spiro said.
“The extreme volatility in cryptocurrencies led to the development of stablecoins such as Tether, which has been trading since 2015. To avoid the big price swings seen in tokens such as Bitcoin, stablecoins are often pegged to another asset such as the U.S. dollar…”