Exchange of any value needs to be based on trust. As the trust flourishes between the parties involved in the transaction, the confidence would increase too with time. It would result in much higher volume and higher value transactions. Bitcoin and other such cryptocurrencies have been expanding its hold in the financial landscape at a great pace in the last few years.
These cryptocurrencies are creating a highly potent decentralized environment. In this scenario, the need for trust is eliminated completely due to the use of blockchain technology. People who are well acquainted with blockchain technology and how it functions are more than welcoming and interested in investing in cryptocurrencies. However, the fact is that majority of the world population is still skeptical about Bitcoin and other cryptocurrencies.
To ensure that the cryptocurrencies attain mainstream popularity and usage, its adoption has to be on a much larger scale. For the wider adoption of cryptocurrencies in the mainstream financial landscape, the consumers would feel more comfortable if there is another protective layer in place. There has to be set standards and rules and a central body they can go to in case of any issues or complaints.
Blockchain technology offers an amazing platform to its participants for exchanging value in an environment that is decentralized and trustless. If the participants do not share their keys, there is no way anyone can steal their value. It is essential for this information to disseminate in society on a large scale to attract more participants. It is important for the crypto world to be based on a set of regulations. With the help of regulations that act as a security for the end-users, it would help the average consumers feel protected and confident when investing.
The Bank Secrecy Act that was passed in the United States in the 1970s is standalone legislation revolving around anti-money laundering cases and also serious terrorist financing cases. This legislation’s primary motive is to ensure that the banks work together with the government to fight against any and all forms of finance-related crimes. In 2001, after the terrorist attack on the World Trade Center, the Patriot Act was passed that further opened broader means of communication between the government and the banks.
In 2019, the international governing body named FATF or Financial Action Task Force extended its set of travel rules regarding money and assets to banks and virtual money exchanges. According to the new applied rule, all virtual asset service providers have to share the identity of any user trading assets of over $1,000. While it does seem straightforward, it ensures that the virtual asset service providers are compliant.
It meant that such providers and exchanges have to screen their users and set certain rules for trading and value exchanges to identify abnormal patterns. The virtual asset service providers also have to share their data or list of all blacklisted customers with the governing body and virtual asset providers.
To be compliant, the KYC or know-your-customer information would also have to be shared by the virtual asset service providers with the authorities as well as other exchanges. Such regulations would help the investors in the long-term and add sustainability to the crypto-framework as well.
A new regulatory framework was recently introduced by the Conference of State Bank Supervisors for the payment companies, money service businesses, and cryptocurrencies businesses and companies. Such regulations would be applicable for major payment companies like PayPal, Western Union, and 76 such companies. The layer of regulations and supervision of law enforcement is the way ahead for the digital assets companies and would help accelerate adoption on a wider scale.