With cryptocurrencies increasingly becoming an integral part of present-day financial systems, criminals have also manifested in the crypto space. Various crypto platforms have now become a fertile ground for criminal activities.
With the exchange platforms and digital assets becoming a popular market, there have been multiple gaps in the system spotted. Criminals have leveraged these system gaps to commit crimes, which were detected by regulators, and precautions were set in place after that to combat this. Among the crimes characteristic of this market include laundering money, using digital assets to finance terrorism, and even bribery.
As much as industries such as the banking sector, housing, and the drugs and pharmaceutical sectors boast of strong associations with the legislature, the crypto space is trying to make its mark in Congress. For instance, while Bitcoin has many lobbyists who are also passionate about it, it has at least ten years of existence so far, and still, not all voters can attest to knowing the cryptocurrency. This means that it is still hard or arguably impossible for a parliamentarian to point to a specific constituent that supports any particular cryptocurrency.
Meanwhile, it’s also hard to deny that crypto adoption is hardly possible without regulation. In this regard, Gianni Di Poce, Financial Analyst President The Mercator, LLC noted:
“To an extent, regulation will help with the continued adoption of cryptocurrencies and blockchain at an institutional level. It’s hard not seeing this as bullish for the crypto sector. More institutions in this space mean more demand and will supply levels are fairly constant, which portends higher prices.”
Regulatory Developments to Combat Money Laundering
The United States Government, among others, has become serious in its enforcement efforts against money laundering. To this end, they have set laws in motion to provide for a notable increase in government funding to support anti-money laundering initiatives (AML) and demand the compliance of all companies that operate beyond the common financial institutions.
The Office of Foreign Asset Control (OFAC), which operates under the US Treasury Department (FinCEN) joined hands with other regulators in setting up the priorities in their mutual effort to fight money laundering and counter-terrorism funding in the process. These priorities serve to lead financial institutions in focusing their anti-money laundering programs on the biggest threats to the financial system and national security.
The Legislative Battle
The cryptocurrency industry was defeated in the battle for a change in the rules about crypto tax reporting that were part of the infrastructure bill. This left the industry exposed to a rather wider regulation of digital assets. Had the amendment happened, there would be some breathing space on the expectations of the new tax reporting from crypto companies.
The infrastructure bill was fundamentally designed to solve the issues resulting from the crypto space, which required that bodies such as the crypto miners and software developers report their tax information to the IRS. Whilst various legislatures supported the bill, some opposed it and even tabled an alternative bill that would be fair to the crypto sector.
With more people progressively embracing crypto, organizations are becoming more vigilant about anti-money laundering policies. Being an unstable landscape, cryptocurrency exchange platforms have been willing to abide by the efforts made by respective governments toward the development of regulatory structures.
Cryptocurrency advocates and supporters believe that the Senate defeat is an indication that it is necessary, now more than ever, that there is a more organized framework and more money to enable the growing industry to capture the attention of lawmakers. According to the crypto lobbyists, the wording of the bill would somehow apply to firms that cannot collect data on their users, such as crypto miners. This action would potentially swathe the industry to external markets.
The debate also revealed that the members of the senate who did not previously know about the sector were interested in the topic. This made it clear that efforts to promote the industry must be set in motion to avoid similar challenges in the days to come. Nevertheless, crypto regulations will be beneficial in the long run despite short-term effects.