The crypto industry has come a long way since Bitcoin saw the start of the day in 2008. Over a decade later, there are hundreds of different cryptocurrencies in the market and numerous exchanges and trading platforms spread across regions and time zones. Although the industry has come a long way, thanks to increased adoption, there are still concerns about the legitimacy of various platforms and projects, and many people continue to view cryptocurrencies with suspicion.
These assumptions are rightly founded, and the main reason for this is the lack of accountability of the platforms dealing with cryptocurrencies due to a lack of regulation. The lack of a clear legal framework and enforcement not only encourages the operation of fraudulent platforms, but also exposes the crypto sector to serious problems such as money laundering and funding of illegal and dangerous activities. When it comes to light, it does more harm to real crypto users due to clampdowns and other restrictive measures taken by governments.
In the past few days there have been numerous reports of investigations and arrests in the crypto industry, mainly due to violations of anti-money laundering legislation. These violations are widespread in the industry as over 56% of crypto exchanges fail to meet AML and KYC requirements, according to a recent CipherTrace report. The combination of non-compliance with the fact that over 70% of Bitcoin transactions were cross-border transactions and a significant portion of criminal money continues to flow into these exchange platforms makes a good argument for the need for crypto rules similar to those followed by the traditional ones Banking and financial institutions.
Based on these revelations, STEX founder Vadym Kurylovych says: “Many crypto owners claim that the tightening of regulations in the crypto industry is destroying the whole idea of the industry: fast, secure and anonymous money transfers without banks or state borders. However, it’s not about destroying the idea of the primary cryptocurrency. It’s about the industry maturing. Bitcoin is increasing in price, as are other cryptocurrencies. DeFi is a hot topic now. This is attracting more and more people to the industry and increasing sales of cryptocurrencies from year to year. Because of this, governments and regulators need to find ways to stop money laundering and illegal activity that can occur if exchanges don’t follow KYC / AML. The loud arrests and investigations into the leading market players prevent other smaller projects from being operated without KYC and AML, set a bad example and encourage new startups to adhere to the rules of the financial industry. Although it may not be 100% as digital assets are not regulated in every jurisdiction. “
While regulations are welcome in the crypto sector, governments and regulators should try to strike a balance between control and ease of use and run a crypto business to create a thriving financial ecosystem. For the most part, many crypto players choose to be non-compliant in order to avoid the cost and sometimes even the bureaucratic hurdles associated with the licensing process under some of the applicable regulations. However, this shouldn’t be used as a justification for non-compliance as it can be serious if caught doing it. In fact, the crypto exchange should proactively ensure compliance and acquire the necessary licenses, even if it means additional costs to solve problems related to money laundering, terrorist financing and other illegal activities for the common good.
In Kurylovych’s words, “It’s easier, of course, not to be compliant. You don’t lose new users due to the complicated onboarding process. You don’t have to pay the compliance team and get the expensive licenses. However, this is not true if you do not know who your users are and if they are trading to make money to fund some terrible illegal activity like terrorism. You can also be fined by various regulators for accepting funds from other nationals, not just the countries where you are licensed. For example, you can face a severe fine if you operate, transfer money or accept payments in Europe but do not comply with anti-money laundering guidelines.
For example, STEX is licensed in Estonia and we adhere to EU regulations for cryptocurrencies. The Estonian jurisdiction is one of the most advanced in Europe when it comes to cryptocurrencies. “
When weighing the pros and cons, it is obvious that regulations for the crypto industry are required to prevent criminal activity and also to ensure the safety of users’ investments. Currently, some countries have regulations that are more beneficial to the industry than others. In order to achieve consistency, it is time for governments to put their heads together and set crypto-industry-friendly regulations so that crypto exchanges and service providers around the world can operate lawfully like traditional financial institutions in accordance with national legal frameworks.
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