Cryptocurrency companies that fault guidelines by regulatory authorities will find it hard to operate, following a warning by the Chairman of the U.S. Commodity Futures Trading Commission (CFTC) and Securities and Exchange Commission (SEC) together with Financial Crimes Enforcement Network (FinCEN) Director.
In a joint statement issued on October 11, 2019, the three regulatory bodies issued a stern warning to crypto-based firms to comply with their guidelines. They emphasized on the commitments surrounding the Bank Secrecy Act (BSA), Anti-Money Laundering (AML), and countering terrorism financing through cryptocurrencies.
All along, crypto-based companies evade compliance regulations, citing the ambiguous nature of digital assets. In many instances, the companies have failed to register digital assets as securities.
With the joint statement from the three major regulatory pillars, no stone will remain unturned. In their statement, the authorities singled out diverse financial instruments such as Money Services Businesses (MSB), derivatives, mutual funds, and others, commanding the firms associated with them to ensure they follow compliance regulations soon.
Registration with Specific Agency
The joint statement further stated that the institutions involved must secure registration with a specific agency. The regulatory authorities believe that doing this will help curb money laundering and terrorist funding through cryptocurrencies.
Consequently, the crypto-based firms must follow strictly the Bank Secrecy Act, which requires them to cooperate with the U.S. government in cases of fraud and money laundering.
Part of the report reads:
“…the AML/CFT activities of a futures commission merchant will be overseen by the CFTC, FinCEN, and the National Futures Association (NFA);
“…those of an MSB will be overseen by FinCEN”
“…those of a broker-dealer in securities will be overseen by the SEC, FinCEN and a self-regulatory organization, primarily the Financial Industry Regulatory Authority (FINRA)”
Therefore, the companies must clearly define their products and secure permission for the said regulators. Consequently, a firm or asset sold by a firm qualifies for registration under the category of “securities” and must adhere to the federal securities law.
Regulatory Authorities Tough on Finance-based Firms
According to the regulators, companies that run finance-based products are “required to report suspicious activity and implement reasonably-designed AML Programs.”
The three Government agencies are aware of the rampant illicit activities and cybercrime involving digital currencies. Therefore, they expect crypto-allied companies to strictly comply with the regulations to avoid security and economic threats to nations.
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