Shadow Crypto trades a challenge for regulators, financial services chief says

Business | 9 May 2018 12:49 pm

Regulators will need to come to grips with whether bitcoin or cryptocurrency transactions should require counterparties to go through a know your customers process, the Financial Services and Treasury Secretary, James Lau, said today.

The know your customer process should be a non-issue if the blockchain is crafted for a permissioned environment where the participants have been screened, he said. "But know your customer is a real challenge or perhaps near impossibility when the likes of bitcoin blockchain is crafted in a permissionless environment, which can be joined by anyone of whatever origin or affiliation. And this is a question that regulators may need to come to grips with sooner rather than later.''

He made the remarks in a spech at at the Financial Stability and Fintech Forum organised by the Alliance for Financial Stability with Information Technology.

Lau also noted being aware of about 1,600 brands of cryptocurrencies, whose numbers are rising, "because a cryptocurrency can be created at any time.''

"Bitcoins are favored by some due to their anonymity, but experts will argue that sending or receiving bitcoins still requires a pseudonym, or in crude terms a nickname. But it is indeed possible to make bitcoin transactions highly anonymous and this flags then a problem with anti-money laundering and counter-terrorist financing,'' he said.

Lau largely addressed the wide range of issues raised by the use of financial technologies, which could affect financial security, integrity and stability. 

The are many problems generated by fintech tools and applications, he said.

"While embracing fintech, governments and regulators need to harness the risks and challenges that come hand in hand.''-The Standard

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