Cryptocurrencies have been the bane of every financial regulator’s existence ever since its inception in 2008. The very concept of digital currencies was to establish a platform where investors could attain some level of privacy and to eliminate any intermediaries that are common in conventional trading. However, its anonymity and lack of any regulations have led the crypto world to be used for illicit activities. This has put not only investors but governments and global regulators on edge. Thus, anti money laundering measures have become a necessary evil for cryptos, whether they like to admit it or not.
A good deal of crypto companies is fighting compliance regulations tooth and nail and has maintained an anarchist attitude towards such regulations. They have now been operating for quite some time without initiating any Know Your Customer or KYC requirements. Such exchanges require no such elaborate procedures for investor and client on boarding. Any investor wishing to invest in cryptocurrency is welcome to sign up and start trading.
The Reason for Cryptos’ Inflexibility
For most crypto companies, it is a simple yet delicate matter of beliefs. Many of them refuse compliance regulations by advocating their right to political and economic freedom. They hold the view that the very inception of crypto is to be free from any sort of interference from state machinery and to have an independent financial platform. Many of the crypto-anarchists go so far as to question the very meaning of “the law”.
Some of them argue that the whole point of introducing the blockchain technology in the trading of crypto was to maintain transparency. They maintain the fact that every transaction occurring in the crypto sector is recorded on the blockchain forever and as transparent as the whole process could get. Moreover, some of the exchanges also complain about compliance costs. They hold the notion that implementing KYC AML compliance can be an added cost to their business that achieves little if any visible results.
Why Compliance is Important for Cryptos?
Admittedly, crypto is not the only space where illicit activities like money laundering take place. But compared to cryptos, the traditional financial sector implements sound compliance regulations as well to curb them. Manual and outdated methods of compliance may not be as effective, but significant progress has been made to automate the compliance processes. Such automated measures have helped in reducing the costs of compliance by a great measure. Additionally, they have also managed to make the whole process more productive and efficient.
Crypto existence has been made notorious for illicit activities, and not without reason. It’s irregulated nature and anonymity has made it an appealing platform for criminals including money launderers and drug traffickers. Implementing tech solutions for anti money laundering compliance procedures can enable cryptos to redeem their reputation among investors and regulators alike. Nowadays solutions are available that verify investors digitally using AI and machine learning protocols. They can enable cryptos to implement KYC AML compliance in a seamless manner without invading customer privacy.
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