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G-20 Wants Countries to Tough Up on Cryptocurrencies with FATF Rules

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Finance ministers and central bankers from the G-20 are urging more countries to adopt regulations that would compel cryptocurrency exchanges to collect customer information as a means of combating money laundering and terrorist financing.

The Group of 20 countries referred to guidelines adopted last June by the Financial Action Task Force (FATF) that it sees as key to stopping financial crimes. The FATF’s so-called travel rule aims to limit money laundering by calling on “virtual asset service providers,” such as cryptocurrency exchanges, to collect extensive identifying information about individuals involved in cryptocurrency transactions.

Finalised in the summer, FATF’s controversial “travel rule” requires virtual asset service providers (VASPs), including wallet providers and exchanges, to share user information with one another each time funds are being transferred. The recommendation is designed to prevent terrorists and money launderers using cryptocurrencies to bypass existing controls and sanctions.

In June 2019, the leaders of G20 held a meeting in Osaka, Japan. The group had then declared their commitment to following the standards for crypto assets, as well as related services the FATF had set up. The G20 meeting had also made effort to address stablecoins.

The G20 believe that stablecoins hold the potential to serve as a global currency, as can be seen by the possibility of China launching a global stablecoin. The country was in the process of a pilot program, but the current COVID-19 crisis is giving others time to react to their pilot program. If the state may bounce back quick enough to remain in the lead.

FATF recommendations are non-binding and give authorities some room to interpret new standards into local law. But countries that seriously diverge or do not adopt recommendations face being blacklisted, potentially cutting them off from crucial investment and global trade.

Many of FATF’s 36 member-states, which include G-20 economies, have already adopted the travel rule. Both South Korea and Singapore have passed legislation that compels VASPs to comply with new anti-money laundering frameworks.

The EU’s fifth anti-money laundering directive (5AMLD), which requires exchanges to register with local regulators and demonstrate compliance, came into effect at the beginning of 2020.

The communique also requested local authorities assist the Financial Stability Board (FSB), which monitors the vulnerability of the global financial system, in drawing up new recommendations for the global regulation of cryptocurrencies.

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