Uncertainty continues to derail the seemingly improving rapport between regulators and crypto leaders, even as mainstream adoption of Bitcoin, Ether, USDT, continues to buoy up.
Notabene, a firm that helps crypto firms navigate through regulatory complexities recently published a 60-page report showing that uncertainty remains the biggest deterrent to achieving sound crypto laws.
The report which particularly anchored its findings on the Travel Rule found that crypto firms were concerned about relinquishing some of the benefits enjoyed by crypto users such as privacy.
The so-called travel rule refers to a law that obligates banks to obtain, hold and transmit transactional information in a bid to identify and report suspicious transactions or freeze questionable transfers. In the U.S., the rule was first proposed in 2020 by the Financial Crimes Enforcement Network (FinCEN), the U.S. money-laundering watchdog.
With cryptocurrencies facing a unique challenge in the implementation of the Travel rule partly due to the lack of counter-party information in the blockchain, this remains the hardest rule for the crypto industry to comply with to date.
According to the report, whereas various crypto firms including Circle, Binance, and FTX have voiced their support for regulation by governments, there is doubt that regulators will abide by the rulebook once the Travel Rule comes into effect.
“Companies would like travel rule roll-out to be fair across the industry, which calls for closer collaboration between regulators and the industry to ensure expectations are clear around roll-out,” says Alice Nawfal, Co-Founder and COO of Notabene.
According to the report, while the crypto industry is taking compliance seriously, only a handful of the respondents point to the sunrise period with more than 60% of crypto firms falling behind in implementing the travel rule. However, the report established that 92% of respondents have an internal compliance department while 70% of the respondents are looking to become fully compliant in Q3/Q4 2021 or Q1/Q2 2022.
With crypto crimes hitting an all-time high of $14 billion in 2021 according to Chainalysis, governments have been moving in to regulate the nascent industry through guidelines such as the Travel Rule, and taxation laws.
Moreover, apart from Russia and India which are already exploring crypto laws, Biden’s administration is also looking to pass a crypto law that will help the government not only tax crypto businesses but also bring the wider crypto industry under the state’s financial laws spectrum.
“This is going to be the first time the U.S. government will have a comprehensive plan when it comes to cryptocurrencies,” says David Wachsman, CEO of Wachsman, “And that will happen by the second half of the year.”
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