French Anti Money-Laundering Targets Crypto: Will Others Follow?

by: The Knowledge Group

October 30, 2018


The Finance Action Task Force, based in Paris, France, has established a framework for global registration of crypto-currency exchanges. This broad regulatory reach applies to every country that has a recognized exchange and is intended to create transparency for government oversight and reduce illegal funds transfers. While the move is applauded by lawyers who frequent the money-laundering enforcement arena in major economies, the coordination of such a regulation from one country to the next is a Mount Everest of a challenge. Put aside the fact that the countries actually need to proactively cooperate with each other in an Interpol-style approach, the issue of who actually runs a crypto exchange needs to be addressed as well.

Cryptocurrencies like Bitcoin are intentionally designed to be self-sufficient and do not marry to a government artificial structure. Everything about a cryptocurrency, including the transfer of it, is built into the code of the cryptocurrency itself. So the currency can be exchanged anywhere, anytime as long as there is an Internet connection and translation clients for the currency on either end of the transfer. The best government can do is outlaw the use of currency to stop it, which just drives the currency underground. Even China and South Korea, who have strictest use rules, are finding actual regulation of cryptocurrencies difficult.

The above begs the question than whether the FATF’s efforts have any real meaning or will bear any fruit. The FATF’s efforts so far are to set up a legal framework. The next step will be to get every major county economy on board and help enforce them. They will come to the test cases that push the laws and rules in practical effect. Most will find their most effective enforcement will be where cryptocurrency use translates back to traditional assets, the kinds of things tax offices and law enforcement can control in a tangible sense. However, when cryptocurrency reaches full capability as a daily money, then the FATF and others will have to step up their game as traditional assets will no longer provide compromising leverage over people’s behavior.


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