New Delhi: As the Parliament proceeds to debate and discuss the regulation or ban of cryptocurrencies and crypto exchanges in Parliament from next week, India may have to keep in mind that new global norms on the permission and management of cryptocurrencies have been set. Going by, especially given that money, without coordinated global regulations, the counterfeiting and financing of terrorism would be much easier.
The FATF last month issued updated rules and guidelines for monitoring and regulating “virtual assets” (read cryptocurrencies) and “virtual asset service providers” (read, exchanges). Their new guidelines, which have been circulated between governments, make it clear that the VA and VASP are covered by FATF standards – meaning countries will be judged based on their performance on new metrics prepared by the FATF.
The guidance outlines the “Application of FATF Recommendations to Countries and Competent Authorities”; as well as VASPs and other obligated entities that engage in VA activities, including financial institutions such as banks and securities broker-dealers. The idea, it says, is for countries to comply with regulations that make it easier to track and intercept money laundering/terror financing (ML/TF). In the absence of global coordination, cryptocurrencies, which remove the bank/financial institution as an intermediary, would take such financial flows out of the purview of global law enforcement authorities.
“VASP … is the full set of obligations of financial institutions and designated non-financial businesses and businesses alike.” Guidance says. Therefore “countries should apply all relevant measures under the FATF recommendations to VA, VA activities and VASP.”
The guidance stresses that governments and central banks need to take “action to identify natural or legal persons carrying out VA activities without the necessary licenses or registrations.” This will apply equally to countries that have banned crypto as well as those that allow it with regulation and monitoring.
Furthermore, FATF rules state that only governments are the “competent authority” to monitor crypto.
The updated guidance for October 2021 adds more detail and clarity to what is expected of governments as they seek to address this new technology that is both an opportunity and a threat. “(1) Clarify the definitions of the VA and VASP to clarify that these definitions are broad and that there should be no case where a relevant financial asset is not covered by FATF standards (either as a VA or other financial asset). (2) provide guidance on how FATF standards apply to stablecoins and clarify that a range of entities involved in stablecoin arrangements may qualify as VASPs under FATF standards. (3) provide additional guidance on risks and tools available to countries to address ML/TF risks for peer-to-peer transactions, which are transactions that do not involve any obligated entities, (4) ) provide updated guidance on licensing and registration of VASPs, (5) provide additional guidance for the public and private sector on the implementation of the ‘Travel Rules’, and (6) include principles of information-sharing and collaboration among VASP supervisors. ,
Basically, it leaves little room for an outright ban by governments. Cryptocurrency and regulation of official digital currency bill Attempts to ban all but some private cryptocurrencies to promote the underlying technologies while allowing official digital currency reserve Bank of India, The proposed legislation “seeks to create a facilitating framework for the creation of an official digital currency to be issued by” reserve Bank of India (RBI). The bill also seeks to ban all private cryptocurrencies in India, however, it allows certain exceptions to promote the cryptocurrency and the technology underlying its use”.
Globally, China has completely banned all cryptocurrencies, and announced that it will issue a digitized yuan. However, blockchain and startups are supported.
The US is more welcoming – New York has BitLicense, a licensing framework for private crypto exchanges. Reports say that the US is working on further clarification of the rules and regulations regarding crypto.
The FATF last month issued updated rules and guidelines for monitoring and regulating “virtual assets” (read cryptocurrencies) and “virtual asset service providers” (read, exchanges). Their new guidelines, which have been circulated between governments, make it clear that the VA and VASP are covered by FATF standards – meaning countries will be judged based on their performance on new metrics prepared by the FATF.
The guidance outlines the “Application of FATF Recommendations to Countries and Competent Authorities”; as well as VASPs and other obligated entities that engage in VA activities, including financial institutions such as banks and securities broker-dealers. The idea, it says, is for countries to comply with regulations that make it easier to track and intercept money laundering/terror financing (ML/TF). In the absence of global coordination, cryptocurrencies, which remove the bank/financial institution as an intermediary, would take such financial flows out of the purview of global law enforcement authorities.
“VASP … is the full set of obligations of financial institutions and designated non-financial businesses and businesses alike.” Guidance says. Therefore “countries should apply all relevant measures under the FATF recommendations to VA, VA activities and VASP.”
The guidance stresses that governments and central banks need to take “action to identify natural or legal persons carrying out VA activities without the necessary licenses or registrations.” This will apply equally to countries that have banned crypto as well as those that allow it with regulation and monitoring.
Furthermore, FATF rules state that only governments are the “competent authority” to monitor crypto.
The updated guidance for October 2021 adds more detail and clarity to what is expected of governments as they seek to address this new technology that is both an opportunity and a threat. “(1) Clarify the definitions of the VA and VASP to clarify that these definitions are broad and that there should be no case where a relevant financial asset is not covered by FATF standards (either as a VA or other financial asset). (2) provide guidance on how FATF standards apply to stablecoins and clarify that a range of entities involved in stablecoin arrangements may qualify as VASPs under FATF standards. (3) provide additional guidance on risks and tools available to countries to address ML/TF risks for peer-to-peer transactions, which are transactions that do not involve any obligated entities, (4) ) provide updated guidance on licensing and registration of VASPs, (5) provide additional guidance for the public and private sector on the implementation of the ‘Travel Rules’, and (6) include principles of information-sharing and collaboration among VASP supervisors. ,
Basically, it leaves little room for an outright ban by governments. Cryptocurrency and regulation of official digital currency bill Attempts to ban all but some private cryptocurrencies to promote the underlying technologies while allowing official digital currency reserve Bank of India, The proposed legislation “seeks to create a facilitating framework for the creation of an official digital currency to be issued by” reserve Bank of India (RBI). The bill also seeks to ban all private cryptocurrencies in India, however, it allows certain exceptions to promote the cryptocurrency and the technology underlying its use”.
Globally, China has completely banned all cryptocurrencies, and announced that it will issue a digitized yuan. However, blockchain and startups are supported.
The US is more welcoming – New York has BitLicense, a licensing framework for private crypto exchanges. Reports say that the US is working on further clarification of the rules and regulations regarding crypto.
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