According to a top regulatory official in the United States on Tuesday, anonymity is enabling crypto assets to finance illicit operations, creating concerns to national security that need to be addressed.
Cryptocurrencies are being used to finance cybercrime, according to Christy Goldsmith Romero, a commissioner at the U.S. Commodity Futures Trading Commission. Victims of this crime include people, businesses, hospitals, and essential infrastructure, she added.
Romero stated at a City Week conference in London that "fraud is a hallmark of digital asset markets, the human toll of which may be overlooked," adding that the lack of visibility in cryptomarkets needs to be addressed.
"It’s essential for governments and particularly the industry to address that which makes crypto so attractive to illicit finance, and that is the allure of anonymity," she continued.
Legally compliant cryptocurrency businesses shouldn't employ "mixers"—software tools that efficiently hide users' identities by pooling and scrambling crypto from a large number of addresses.
"Congress is already considering new laws on addressing anonymity and digital identity," Romero claimed.
Businesses that use cryptocurrency must demonstrate that they have internal measures in place to stop money laundering and terrorist financing.
The United States placed sanctions on Tornado Cash, a virtual currency exchange, last year on the grounds that it assisted hackers, particularly those from North Korea, in transferring money obtained through cybercrime.
"It’s possible for all crypto companies to distance themselves from mixers and anonymity enhancing technology while still providing customers financial privacy," according to Romero.
Before universal standards are agreed upon and implemented for a borderless sector, regulators in the United States, the European Union, Britain, and other countries are attempting to understand cryptocurrency.
"As a result, different people are doing different things and, yes, absolutely, firms are picking and choosing where to set up shop,” John Schindler, secretary general of the Financial Stability Board (FSB), the G20’s coordinator for financial rules, told the conference."
According to him, the FSB will shortly release the proposals for regulating cryptoassets in their final form.
"We’re catching up to this innovation that’s going so quickly," Schindler continued.
By fLEXI tEAM