By Dan Byrne for AMLi
A CRYPTOCURRENCY expert has called on the Financial Action Task Force to completely rethink its approach to governing the virtual assets industry.
Sian Jones, senior partner at crypto asset consultancy firm XReg Consulting, and expert on the virtual asset services industry, called on FATF to develop a new model for cryptos – one which did not involve intermediaries.
Speaking at the close of the V20 – a summit for virtual asset service providers (VASPs) – Jones maintained that the world of digital finance was rapidly becoming de-centralised, making it different from other markets and less relevant to the concept of intermediaries.
Jones claimed that a core component of FATF’s cryptocurrency strategy – the so-called ‘travel rule’ – required intermediaries to collect and report relevant information to authorities.
This kind of standard would not work when it came to a de-centralist finance (DeFi) virtual asset market, she stressed.
“FATF must consider developing entirely new approaches to manage money laundering,” she told the summit.
“The tried and test methods work in the traditional world of money. Arguably, they can be made to sort of fit the intermediated crypto world. They do not necessarily fit a DeFi world where they are not fit for purpose.”
Jones claimed that one of the central aims of cryptocurrencies from the very beginning was to eliminate the need for middle-operators, so FATF’s strategy was taking the industry in the wrong direction.
“Cryptocurrency was born out of a desire… not to circumvent authority, break the law of facilitating money laundering, but rather to remove intermediaries, to disintermediate traditional finance.”
FATF has previously issued ‘global binding standards’ on the subject of virtual assets which are largely falling on member states – and in-country VASPs – to comply with.
FATF members have proven eager to adapt to what FATF recommends, with jurisdictions like the Cayman Islands, Hong Kong and Singapore all announcing tougher regulations on VASPs in recent weeks to align with FATF standards.
The call for less attention on VASPs from Jones will likely cause some friction with the global watchdog’s goals for the near future.
As an alternative, Jones called for the organisation to “double down on its engagement with all actors,” – not just VASPs.
This, she said, would include DeFi software developers and users who are not part of the industrialised crypto world.
She also called for the virtual asset industry to come together in one voice and speak directly to FATF, eliminating the near-two-dozen separate stakeholders currently providing feedback.
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