Cryptocurrencies are under “serious scrutiny,” according to news reports. Only this isn’t new information.
Regulators have spent years scrambling to identify the potential problems with digital assets. And while government agencies have yet to agree on a legal categorization for DeFi, they continue to institute criminal parameters.
Decentralization has long been attractive, and privacy remains, you got it – key, for those interested in forming financial agreements online. But in an alleged attempt to minimalize crimes like money laundering, some politicians laud legislation that would force crypto businesses to comply with traditional financial regulations.
The proposed Digital Asset Anti-Money Laundering Act would seek to reduce “national security risks” through increased oversight of businesses that handle crypto exchanges, like miners and wallet providers. In turn, this would affect the Know-Your-Customer (KYC) requirements.
KYC: are the pros cons?
Crypto exchanges may reduce the risk of legal action and proactively handle damage control through KYC compliance. There’s also the matter of building trust among potential investors.
Both tech-savvy traders and criminal masterminds have access to the same blockchains the government is trying to regulate for the better good. And those on either side of the issue tend to resist proposed oversight.
Why regulation matters
Exchanges cooperating with KYC policies can mitigate risk after a data breach by freezing accounts allegedly related to illegal conduct. After a reported $8.6 billion of crypto laundered in 2021, there may be a point for increased blockchain analysis.
The problem remains that accusations can fly, regardless of what laws are enacted. Until the dust settles on bearish activity in the DLT market, you’d best HODL – to both your tokens and legal counsel.