The Financial Action Task Force (FATF) wants crypto exchanges to share the information of users with each other, whenever funds are transferred between firms, to curtain a growing number of illicit activities stemming under the guise of the global cryptocurrency industry.
The Paris-based organisation wants cryptocurrency operators to establish the identity behind crypto funds senders and recipients, conduct proper due diligence to ensure they are not engaging in illicit activity, and develop risk-based programs, among others.
Countries will also be compelled to register and supervise cryptocurrency-related firms such as exchanges, which will have to carry out detailed checks on customers and report suspicious transactions, FATF, that counts 37 member countries, said in a statement.
We also have some investigation on the dark web in which the payments are made in cryptocurrencies, sometimes in bitcoin, and they are switching it to more anonymised cryptocurrencies"
The move marks the first worldwide regulatory attempt to constrain the rapidly growing sector.
US Secretary of the Treasury Steven Mnuchin said that the new measure will require that crypto assets service providers comply with anti-money laundering (AML) and combating the financing of terrorism (CFT) procedures in the same way traditional institutions do.
Simon Riondet, head of financial intelligence at Europol, a European Union law enforcement agency, said earlier in an interview with Reuters that money laundering with cryptocurrencies has been increasing. "We also have some investigation on the dark web in which the payments are made in cryptocurrencies, sometimes in bitcoin, and they are switching it to more anonymised cryptocurrencies," Riondet said.
So-called privacy coins such as Monero allow users to conceal nearly all details of their transactions.
Calling the "threat of criminal and terrorist misuse of virtual assets" a "serious and urgent" issue, FATF said in a public statement that it will give countries 12 months to adopt the guidelines, with a review set for June 2020.
The crypto industry has voiced concerns that blockchain technology would have to be fundamentally restructured — or otherwise a complex parallel system constructed between exchanges — in order to satisfy new reporting requirements, while others are concerned about the toll that increased compliance costs will exact on industry businesses.