G20 Summit Meeting V20 Preview: Digital Asset Service Proposal Extends Effective Date of FATF Standard

From June 28th to 29th, the V20 Virtual Asset Service Providers Summit will be held.

According to the V20 official website, the conference will convene G20 representatives, as well as cryptocurrency exchanges such as Circle, Coinbase, bitFlyer, Kraken, and Huobi, to jointly explore feasible technical solutions to achieve the FATF's Financial Action Task Force (FATF). The latest cryptographic asset monitoring guidelines.

This cryptographic asset monitoring guideline is the Risk-Based Perspective of the FATF's June 21 issue: A Charter for Regulating Digital Assets and Digital Asset Providers. The most controversial is that this new regulation requires that the Regulatory Virtual Asset Service Provider (VASP) identify the sender and recipient of the funds; ask VASP to share information with law enforcement; understand the customer and conduct appropriate due diligence to ensure They do not engage in illegal activities and so on.

It is called to supervise VASP like a regulated commercial bank.

In order to influence the entry into force of the FATF guidelines, the V20 meeting will propose: the cryptocurrency industry submits a harmonized regulation that reflects the uniqueness of the cryptographic assets to influence the FATF proposal; in order to respond appropriately, the cryptocurrency industry will extend the proposal to the new FATF standard. date.

(Source: V20 official website)

2018: The United States promotes FATF cryptocurrency regulation

In fact, to understand this controversial cryptographic asset supervision guidelines, we must first start with the FATF. It is currently the most influential inter-governmental anti-money laundering and anti-terrorist financing organization in the world. Its mission is to formulate international standards and promote the effective implementation of relevant laws, regulations and administrative measures to combat money laundering, terrorist financing and proliferation financing. Currently, its members have covered 38 countries and regions.

(FATF member source: FATF official website)

In recent years, as digital currencies have become more and more known, the use of digital currency anonymity, cross-border transactions, safe-haven currencies, and constant anti-inflation in the global arena have become increasingly rampant. In addition to money laundering, due to the characteristics of trading platforms and digital currencies, transfers are not regulated by traditional banks and securities transactions, and existing anti-money laundering laws are not applicable. Digital currency has become a means of capital flight.

Focusing on this aspect of the FATF, in 2014, a report on virtual currency “Virtual Money: Key Definitions and Potential Anti-Money Laundering (AML)/Anti-Terrorism Financing (CFT) Risks” was released. The report covers “key definitions” of emerging payment methods such as virtual currency and “potential anti-money laundering/counter-terrorism financing risks”, laying the foundation for further policy development.

In February 2018, at the FATF meeting, representatives of the member states and the European Commission asked the FATF, which is responsible for formulating a global anti-money laundering policy, to revise its standards on cryptocurrencies, urging global institutions to better understand the risk of money laundering associated with cryptocurrencies.

In July of the same year, at the meeting of G20 finance ministers and central bank governors, the G20 called on the FATF to take further action to combat proliferation financing and asked the FATF to explain in October 2018 how its standards would be used for the regulation of crypto assets.

In July, it was also the first month in which the United States assumed the presidency of the FATF. The FATF stipulates that its chairman shall rotate in each member state (region) and be appointed by a rotating government to appoint a senior official for a term of one year (from July of the following year to June of the following year).

Affected by cryptocurrencies and the influence of countries on this regulatory demand, the United States, which was the presidency in 2018, included virtual currency in its main work plan for the year.

(FATF work plan source: FATF official website)

In October 2018, the FATF revised its previous recommendations and announced that it will announce the first anti-money laundering regulations for cryptocurrencies in June 2019 to provide a standard that can be followed by global member states. In the following December, the G20 countries formally signed a joint statement agreeing to encrypt the currency industry according to the FATF standard.

2019: The international version of 9.4 strikes?

After 2018 exploration and discussion, in February 2019, the FATF issued a draft of the “Public Statement – ​​Mitigating the Risk of Virtual Assets” and stated that it will be released on June 21, 2019. In this statement, the FATF recommends that: (1) countries should pay attention to the possible risk of money laundering and terrorist financing of “virtual asset service providers” (VASP); (2) countries should require VASP to obtain permission or registration, but not required The qualified person will separately register the license; (3) each country should ensure that the VASP is adequately supervised or supervised by AML / CFT;

Among them, it refers to “acquiring and holding the information of the exact sender and receiver and submitting this information to the collection agency. In addition, countries should ensure that the receiving institution obtains and holds the required sender information and receives it. The party’s information is also the focus of the final version of the June release.

At the end of May 2019, the FATF issued guidelines to member states requiring the digital currency exchange to implement KYC data migration regulations that are similar to those of the banking industry. That is to say, the digital currency exchange must also notify each other of the customer information when transferring funds. The regulation will take effect in Japan in October, and then it will take effect in the Asia-Pacific region and will enter into force in Europe and the United States next year.

In the early morning of June 22, Beijing time, the FATF official website released the "risk-based perspective: the charter guide for regulating digital assets and digital asset service providers", which led to extensive discussions.

One party is more positive:

Global Digital Finance, a cryptocurrency industry organization, welcomed the new FATF regulations. The executive director of the agency said: "The FATF's recommendation that companies include detailed information on senders and beneficiaries in cryptocurrency transactions may be difficult to achieve. We will obviously comply, but the challenge is to have technical facilities to do something. ”

Deng Jianpeng, a professor of law at the Central University of Finance and Economics, said: This guidance document has a positive effect on the normal development and healthy use of virtual assets. Domestic legislation and judicial interpretation should respond in a timely manner, and consider making corresponding amendments. First, the virtual currency should be included in anti-terrorism financing and anti-money laundering. At the same time, the legitimate rights and interests of the legal holders of virtual assets should be clearly defined in law and justice. protection.

The other party questioned the feasibility of implementing the charter guide:

Hong Weining, dean of the Jinqiu Blockchain Research Institute, said that the FATF's regulatory recommendations on VASP are completely unexpected, rigid and lacking in enforceability. The impact on the market can be referred to the 2017 domestic regulatory policy. Worse.

The vice president of ZB Group said that the regulatory measures to share the personal information of the two parties are KYC and anti-money laundering methods applicable to traditional financial institutions. The blockchain technology itself has more advantages in financial technology supervision. The regulation of the encryption industry has to be solved with encryption technology and encryption thinking.

In addition to this, there are also "happy and mixed". The chief architect of Lightning Labs, a commercial company focused on Bitcoin Lightning Networks, said: On the one hand, the guide gives clear guidance on compliance for digital currency exchanges; on the other hand, it greatly increases the operating costs of digital currency exchanges.

Not only the industry personnel and experts from various countries expressed concern about this, but the member states of the FATF also paid special attention to the changes brought about by this charter. Because although the relevant standards of the FATF are not legally binding, according to their regulations, countries or regions that do not cooperate or take effective measures will face FATF countermeasures and be restricted in attracting foreign investment and national settlement, thus benefiting the economy. loss.

Korea, Japan and Russia cooperate with FATF encryption supervision

The next day after the release of the FATF guidelines, according to the analysis of the Financial Analysis Institute of the Korea Financial Commission, virtual currency transactions are subject to the FATF cryptocurrency regulatory guidelines. If it fails to comply, the business license will be cancelled; and the bill is being retained in Congress and is scheduled to begin in the second half of next year.

Prior to this, South Korea, which has stricter regulation of cryptocurrencies, also actively responded to FATF's measures regarding cryptocurrency regulation.

In February 2018, the FATF stated that it would increase its efforts to monitor the digital currency used in money laundering activities. South Korean officials said that South Korean financial regulators have notified global anti-money laundering agencies about their obligation to trade with digital currencies to combat money laundering. The Financial Services Commission said in a statement that the anti-money laundering guidelines for Korean digital currency transactions were drafted among members of the FATF.

In May 2019, the Korean government decided to abolish the anti-money laundering guide for virtual currency due to the draft explanatory notes of the Virtual Asset Service Provider Guide issued by the FATF, and will introduce legislation to directly regulate cryptocurrency transactions. Once the amendment is approved, it will require the cryptocurrency exchange to provide the bank with a comprehensive analysis of its AML data in order to maintain its account. This direct control at the national level is designed to increase user protection and transaction transparency.

In addition, Russia and Japan are also more cooperative with the FATF's regulatory actions on cryptocurrencies.

In October 2018, the Moscow administration plans to work with the FATF to regulate the cryptocurrency market. Dmitry Peskov, a Putin spokesperson and special representative for digital and technology development, said in an interview that the cooperation with the FATF was considered because of the high risks in the industry. At the same time, Dmitry Peskov also said that the country is not rushing to introduce encryption regulations. Legislators should wait for the FATF's instructions on digital currency before introducing the latest version of the draft encryption regulations. In May 2019, according to the requirements of the FATF, Russia postponed the process of its encryption regulation legislation.

In January 2019, banks and virtual currency exchanges under the jurisdiction of the Japan Financial Services Agency needed to report on the state of maintenance and prevention of money laundering and terrorist financing activities. The Japan Financial Services Agency is said to have promoted the anti-money laundering policy because the FATF’s fourth “mutual review of Japan” will begin this fall, and the Financial Services Agency will promote the early preparation of relevant targets; in May, the Financial Action Task Force on Anti-Money Laundering ( FATF) In the fall of this year's review, the Japan Financial Services Agency cracked down on cryptocurrency exchanges that offer users anonymous or weak authentication.

In April of this year, Pakistan and Lithuania also carried out their own cryptocurrency supervision activities in accordance with the FATF's action plan and requirements.

As part of the FATF Action Plan, the Pakistani federal government introduced the Electronic Money Agency (EMIs) regulations on April 1 to manage digital currencies. These regulations are based on recommendations in the FATF Action Plan. Pakistan is now implementing these recommendations and introducing an electronic money regulation under which the government will issue EMI permits. The government will also be authorized to suspend or cancel EMIs licenses that violate regulations.

The Director of the Financial Market Policy Division of the Ministry of Finance of Lithuania stated that through the implementation of certain restrictions on the financial business, the Lithuanian authorities drafted amendments to the law more stringent than the EU's fifth anti-money laundering directive. Lithuania is likely to be the first country in the world to implement FATF recommendations, not only applying these requirements to cryptocurrencies to trade with traditional currencies, but also applying these requirements to transactions between cryptocurrencies.

July: China will be the chairman of the FATF in 2019

In the past few days, after the publication of the FATF cryptocurrency guide, Quan Dan, a former senior official of the US Consumer Financial Protection Agency, said that the influence of the guidance document is unquestionable; especially now that the United States is the chairman of the FATF, which itself indicates the US fiscal The attitude and policy of anti-money laundering are the embodiment of the will and interests of the United States.

Mutual chain pulse observation, in 2019, that is, from July to June 2020, China will assume the rotating presidency of the FATF. I do not know what role China will have in the international supervision after it has been strictly supervised by the United States.

Author: Mutual chain pulse King-propelled vehicle

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