CFTC Proposes New Measures To Eliminate Anonymous Crypto Risk
Key Points:
- CFTC commissioner proposes reducing cryptocurrency anonymity as a means of managing illicit finance risks.
- Crypto companies can maintain financial privacy without relying on mixers and anonymity-enhancing technology.
- Congress is considering new laws addressing anonymity and digital identity.
During a keynote speech on digital finance at City Week 2023 in London on April 25, Christy Goldsmith Romero, a United States Commodity Futures Trading Commission (CFTC) commissioner, proposed a solution for managing the risks associated with digital assets.
Romero emphasized the importance of taking action to address the primary feature that makes cryptocurrencies appealing to illicit finance— anonymity. She stressed that the risks associated with digital assets must be managed because market integrity, national security, and financial stability are crucial and cannot be compromised.
Romero suggested that reducing the anonymity of cryptocurrencies is a potential solution for mitigating illicit finance risks in the cryptocurrency market. She explained that while public blockchains provide some transparency and traceability, mixers and anonymity-enhancing technology increase the potential for substantial risk. Mixers are services that blend many users’ cryptocurrencies to confuse the funds’ origins and owners. This level of privacy is hard to achieve in Bitcoin, Ethereum, and most other public blockchains because they are transparent. Therefore, Romero encouraged all crypto companies to distance themselves from mixers and anonymity-enhanced technology while still appropriately providing financial privacy for their customers.
Romero also highlighted the importance of identity verification, stating that two mixers— Blender and Tornado Cash—were recently sanctioned by the United States Treasury Department. Tornado Cash was allegedly involved in laundering $7 billion, including millions of dollars stolen by the North Korean state-sponsored hacking group Lazarus Group, which has been involved in cyberattacks to aid illicit nuclear and ballistic missile programs. Thus, identity verification is crucial to prevent crypto’s use for illicit finance.
Romero emphasized that there is a distinction between financial privacy and anonymity. Traditional finance (TradFi) ensures financial privacy by verifying the customer’s identity through Know Your Customer (KYC), Anti-Money Laundering (AML), and Countering the Financing of Terrorism (CFT) measures without relying on anonymity-enhancing technology. Therefore, Romero encouraged exchanges and decentralized finance (DeFi) platforms to verify the digital identity of users, pointing out that more often than not, DeFi services are not fully decentralized but instead maintained by central parties who could verify identities and may be held accountable for doing so.
Romero mentioned that there are existing technologies to provide digital identity and more are being developed. Congress is also considering new laws addressing anonymity and digital identity. The U.S. government will continue to prioritize preventing crypto’s use for illicit finance.
DISCLAIMER: The Information on this website is provided as general market commentary and does not constitute investment advice. We encourage you to do your own research before investing.
Join us to keep track of news: https://linktr.ee/coincu
Annie
Coincu News
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CFTC Proposes New Measures To Eliminate Anonymous Crypto Risk
Key Points:
- CFTC commissioner proposes reducing cryptocurrency anonymity as a means of managing illicit finance risks.
- Crypto companies can maintain financial privacy without relying on mixers and anonymity-enhancing technology.
- Congress is considering new laws addressing anonymity and digital identity.
During a keynote speech on digital finance at City Week 2023 in London on April 25, Christy Goldsmith Romero, a United States Commodity Futures Trading Commission (CFTC) commissioner, proposed a solution for managing the risks associated with digital assets.
Romero emphasized the importance of taking action to address the primary feature that makes cryptocurrencies appealing to illicit finance— anonymity. She stressed that the risks associated with digital assets must be managed because market integrity, national security, and financial stability are crucial and cannot be compromised.
Romero suggested that reducing the anonymity of cryptocurrencies is a potential solution for mitigating illicit finance risks in the cryptocurrency market. She explained that while public blockchains provide some transparency and traceability, mixers and anonymity-enhancing technology increase the potential for substantial risk. Mixers are services that blend many users’ cryptocurrencies to confuse the funds’ origins and owners. This level of privacy is hard to achieve in Bitcoin, Ethereum, and most other public blockchains because they are transparent. Therefore, Romero encouraged all crypto companies to distance themselves from mixers and anonymity-enhanced technology while still appropriately providing financial privacy for their customers.
Romero also highlighted the importance of identity verification, stating that two mixers— Blender and Tornado Cash—were recently sanctioned by the United States Treasury Department. Tornado Cash was allegedly involved in laundering $7 billion, including millions of dollars stolen by the North Korean state-sponsored hacking group Lazarus Group, which has been involved in cyberattacks to aid illicit nuclear and ballistic missile programs. Thus, identity verification is crucial to prevent crypto’s use for illicit finance.
Romero emphasized that there is a distinction between financial privacy and anonymity. Traditional finance (TradFi) ensures financial privacy by verifying the customer’s identity through Know Your Customer (KYC), Anti-Money Laundering (AML), and Countering the Financing of Terrorism (CFT) measures without relying on anonymity-enhancing technology. Therefore, Romero encouraged exchanges and decentralized finance (DeFi) platforms to verify the digital identity of users, pointing out that more often than not, DeFi services are not fully decentralized but instead maintained by central parties who could verify identities and may be held accountable for doing so.
Romero mentioned that there are existing technologies to provide digital identity and more are being developed. Congress is also considering new laws addressing anonymity and digital identity. The U.S. government will continue to prioritize preventing crypto’s use for illicit finance.
DISCLAIMER: The Information on this website is provided as general market commentary and does not constitute investment advice. We encourage you to do your own research before investing.
Join us to keep track of news: https://linktr.ee/coincu
Annie
Coincu News
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