Could The New Financial Action Task Force Regulation Be The End Of Bitcoin?
When people talk about Bitcoin, you often hear it being described as a private, peer to peer, digital store of wealth. However, when it comes to regulators around the world, there is a certain fixation on the privacy aspect of cryptocurrency. While it is important that everyday people are able to maintain their personal and financial privacy, anonymous transactions have the potential to facilitate money laundering. So in order to address this issue, the Financial Action Task Force (FATF) put forth a new regulation in June designed to break the privacy of cryptocurrency. This regulation is called the “travel rule”.
A quick background on the FATF: it is a group of 37 member countries with the purpose of setting international anti-money laundering standards. It is essentially the United Nations for fighting financial crimes. While regulations put forth by the FATF are not law, the member states are obliged to turn FATF regulatory suggestions into locally enforceable regulation.
So what is the travel rule? It requires all financial institutions to identify both the sending party and the receiving party within a payment transaction equal to or greater than $3,000.
It turns out that this already happens within today’s traditional financial systems when conducting bank transfers. However, accomplishing this directly within the Bitcoin is close to impossible. There is a technique to embed text data by converting the data into a wallet address and sending that address a small amount of funds. However, this would be giving away private consumer data publicly with no way to remove it, forever.