Why anti-money laundering laws could be a bane for cryptocurrencies and never a boon

With India placing cryptocurrencies below Prevention of Cash-Laundering Act, 2002, specialists appear to discover how the prospect can profit international decentralised panorama. It’s believed that incorporation of anti-money laundering (AML) legal guidelines can assist develop relationships between traders and cryptocurrency companies. 

In keeping with Chainalysis, a blockchain analytics firm, round $8.6 billion was laundered utilizing cryptocurrencies in 2021, which represented a 30% rise from 2020. The corporate additional clocked a 1,964% improve in cryptocurrency-based laundering via decentralised finance (DeFi) protocols. “By complying with AML laws, national crypto firms can become trustworthy and approachable to potential investors. Knowing that the government has put in place security measures to protect the interests of investors across the country can make investors confident in the industry, which can lead to investment and growth,” Punit Agarwal, founder, KoinX, a cryptocurrency taxation agency, informed FE Blockchain.

Market analysis has proven that international AML legal guidelines can allow prevention of terror financing and pump and dump practices. Insights from Alessa, a fraud administration software program resolution, talked about {that a} fashionable cryptocurrency AML strategy can guarantee discount in cryptocurrency AML compliance vulnerabilities for Web3.0 and different cryptocurrency platforms. Practices corresponding to real-time transaction monitoring and AML threat scoring can help mitigation of cryptocurrency-oriented threat components for companies.  

“I believe the aim of AML laws is to minimise occurrences of money laundering and enhance the safeguarding of user funds. In India, companies offering crypto services should comply with AML laws on their platforms and monitor transactions that exceed Rs 10 lakh,” Edul Patel, co-founder and CEO, Mudrex, a crypto-investing platform, said. 

Reportedly, international regulators corresponding to Monetary Motion Activity Pressure (FATF), UK’s Monetary Conduct Authority (FCA), European Union’s Anti-Cash Laundering Directive (AMLD), amongst others, have stepped up their efforts to implement international AML laws. For instance, the UK’s FCA emphasises on conformity with AML/CFT reporting and buyer safekeeping requirements. In March, 2022, Joe Biden, president, United States, unveiled an Govt Order on Making certain Accountable Improvement of Digital Belongings. 

Furthermore, future predictions point out that cryptocurrency-based AML legal guidelines can assist with inclusion of decentralised exchanges (DEXs) and peer-to-peer transactions. “The future of AML regulations in crypto landscape is likely to become stringent as cryptocurrencies continue to gain popularity and adoption. We can expect to see more countries and regulatory bodies implement AML regulations specific to the crypto industry,” Tushar Gandotra, founder, FiEx, a metaverse-based firm, concluded. 

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