Crypto Ecosystem that is "Regulated" - are we really free?

[Flexystar]

This news came on money control from India where finance minister has launched new rule under which every crypto exchange is asked to keep track of users and if there is any suspicious activity then it must be reported to the authorities.

But what's new in this? The news states that there are some harsh regulations and sections which notes that, exchangers are required to report if they also suspect any sort of money laundering that is underway. I am really not sure how this can be tracked successfully and also whether any exchanger would ever open up like this considering they will also get tangled up in the court room if the money laundering was happening on their exchanger. 

The sections that are mentioned will most deal with strict KYC compliance, anti money laundering practices and due diligence as per the banking system. More or less these are the rules which are dragging crypto currencies into harsh regulations and indirectly they are called for regulated crypto ecosystem.

The finance ministry has notified that crypto or virtual asset businesses will now be in the ambit of the Prevention of Money Laundering Act, 2002 (PMLA) and Indian crypto exchanges will have to report suspicious activity to the Financial Intelligence Unit India (FIU-IND).

"Participation in and provision of financial services related to an issuer’s offer and sale of a virtual digital asset... For the purposes of this notification 'virtual digital asset' shall have the same meaning assigned to it in Clause (47A) of Section 2 of the Income-Tax Act, 1961 (43 of 1961)," said a gazette paper of issued by the Government of India.

What does it mean?

Sharat Chandra, Co-Founder India Blockchain Forum said that this notification is a great step towards compliance. "It mandates entities dealing in crypto to follow KYC, anti-money laundering regulations and due diligence as followed by banking and other financial entities which fall under the classification of reporting entities under PMLA," he said.

"Slowly but surely, we are moving towards a regulated crypto ecosystem! Entities such as CoinDCX are now required by law to conduct due diligence and enhanced due diligence under the PMLA," said Sumit Gupta, Co-Founder and CEO of CoinDCX, a crypto exchange.

Crypto, virtual assets to come under money laundering provisions

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[cabron]

They wouldn't really expect an exchange will report an activity where it could also subject themselves to an investigation.
If this same notification also mandates to their banks, the banks will also not voluntarily report themselves as it's the banks who are usually laundering money. It could be the same for crypto exchanges.

It's the Financial Intelligence Unit India (FIU-IND) that regulates crypto in India and not the SEBI. Just like the US SEC is doing, the Indian government needs a regulatory capture also to those Indian exchanges to impose a mandate.

[Anonylz]

So what you are saying in essence is the exchange should always look the other way even if they recognize and identify suspicious activities that could practically jeopardize the business and also endanger the funds of millions of users?
I don't really get why crypto regulations cause so many worries among crypto users because the life we leave in general is regulated.
what makes you think even if crypto is entirely decentralized that you are free?

[Nwada001]

So what you are saying in essence is the exchange should always look the other way even if they recognize and identify suspicious activities that could practically jeopardize the business and also endanger the funds of millions of users?

I understand it the other way around; what it means is that the exchange will not just report suspicious activity into the authority; by doing so, it will not just alert the authority of the activity but they will also be charged for allowing such fraudulent activity to pass through their exchange. But instead of them going to alert the authorities, they will take charge of the issue and handle it within the exchange. Exchanges do that slot unless something warrants the attention of the Fed, in which case they give control to the authority just over the suspected user account. 

[coupable]

Of course we did not become free.  Our demands for countries to adopt legislation that supports Bitcoin and digital currencies is nothing but to facilitate dealing with them today as long as the world adopts systems that do not encourage freedom.  Bitcoin and cryptocurrencies can offer complete freedom when they are used in a free environment and not in a world based on centralization.

[Fortify]

This news came on money control from India where finance minister has launched new rule under which every crypto exchange is asked to keep track of users and if there is any suspicious activity then it must be reported to the authorities.

But what's new in this? The news states that there are some harsh regulations and sections which notes that, exchangers are required to report if they also suspect any sort of money laundering that is underway. I am really not sure how this can be tracked successfully and also whether any exchanger would ever open up like this considering they will also get tangled up in the court room if the money laundering was happening on their exchanger. 

The sections that are mentioned will most deal with strict KYC compliance, anti money laundering practices and due diligence as per the banking system. More or less these are the rules which are dragging crypto currencies into harsh regulations and indirectly they are called for regulated crypto ecosystem.

The finance ministry has notified that crypto or virtual asset businesses will now be in the ambit of the Prevention of Money Laundering Act, 2002 (PMLA) and Indian crypto exchanges will have to report suspicious activity to the Financial Intelligence Unit India (FIU-IND).

"Participation in and provision of financial services related to an issuer’s offer and sale of a virtual digital asset... For the purposes of this notification 'virtual digital asset' shall have the same meaning assigned to it in Clause (47A) of Section 2 of the Income-Tax Act, 1961 (43 of 1961)," said a gazette paper of issued by the Government of India.

What does it mean?

Sharat Chandra, Co-Founder India Blockchain Forum said that this notification is a great step towards compliance. "It mandates entities dealing in crypto to follow KYC, anti-money laundering regulations and due diligence as followed by banking and other financial entities which fall under the classification of reporting entities under PMLA," he said.

"Slowly but surely, we are moving towards a regulated crypto ecosystem! Entities such as CoinDCX are now required by law to conduct due diligence and enhanced due diligence under the PMLA," said Sumit Gupta, Co-Founder and CEO of CoinDCX, a crypto exchange.

It's a bit odd, because most people view cryptocurrency in one of two ways, either 1) it is an asset they buy (with money from external sources like a credit card or bank account) with the aim to hold and sell to someone else at a higher price (cashing out via a traditional bank) or 2) they are using it as a functional currency, the original intention behind Bitcoin, which like a normal currency can require "foreign exchange" to convert it into the local currency that you use for daily costs. Unless you are living at the super rich end of society, because you have some vast amount of Bitcoin, then there is simply not infrastructure like shops available to live off Bitcoin entirely - you will interact with traditional banking solutions somewhere along the line.

[lionheart78]

Isn't what the authority wanted is just a normal procedure if there is a suspicion of money laundering?  I am not surprised to hear this kind of news since this already existed even before the cryptocurrency boom.  Aside from that news always sound horrible because most of its content is exaggerated but if the thing is really implemented, it isn't that strict.

Exchanges may require KYC but as long as our fund comes from legal means, I do not think there is something to worry of being reported as one of the money launderers.  And in sense of being free, we are not ever since we were born.  We never had the freedom to choose our gender, to choose our parents and siblings, especially to be born into a wealthy family

As the cryptocurrency boom we should expect the government to butt in with their regulation.

[stompix]

The sections that are mentioned will most deal with strict KYC compliance, anti money laundering practices and due diligence as per the banking system. More or less these are the rules which are dragging crypto currencies into harsh regulations and indirectly they are called for regulated crypto ecosystem.

The classic story of only wanting the good parts of everything.
Cryptolovers want the government to accept crypto, they want the governments to invest in it, and they want to be allowed to spend it everywhere but god forbid they should pay sales tax or VAT or have to disclose like other assets their profits from it and get taxed upon it.
Exchanges are business, it's normal for a business dealing with any kind of financial transaction to follow the same rules as the other, funny again, people want protection like FDIC insurance to be protected against crappy exchanges but no way in hell I'm doing KYC or am I reporting this in my tax form or anything else.

You have to choose, nobody is doing anything against your freedom, and you can send and receive coins as you see fit, but once you're a licensed business you have to follow the same rules as everyone else, crypto or no crypto.

I understand it the other way around; what it means is that the exchange will not just report suspicious activity into the authority; by doing so, it will not just alert the authority of the activity but they will also be charged for allowing such fraudulent activity to pass through their exchange. But instead of them going to alert the authorities, they will take charge of the issue and handle it within the exchange. Exchanges do that slot unless something warrants the attention of the Fed, in which case they give control to the authority just over the suspected user account.

Exchanges are not law enforcement agencies nor have they judicial powers.

Exchange can't seize funds they can only freeze them and report them to a law enforcement agency in the country they reside in, they can't judge on themselves that those funds are clean and they are not, suspicious activity is reported and it's the authorities after an investigation that will decide if those are clean funds or involved in money laundering schemes.
To give an example, if in my shop you want to pay with a 500E euro bill and I think it's suspicious I don't have the right to put it in my pocket and then tell you to come in two weeks to as I find out if it's fake or not, I either report to the police and let them deal with it or I refuse it and tell you to go to another store.

[un_rank]

A centralized exchange by virtue of its operation is already regulated, even without government interference. You give up control to them and the exchange gives you rules you have to adhere to otherwise you lose access to the assets in their custody. There even is no guarantee that you would not be restricted from spending it without breaking any of the rules.

More or less these are the rules which are dragging crypto currencies into harsh regulations and indirectly they are called for regulated crypto ecosystem.

Avoiding those indirect channels means avoiding regulations.

Exchanges may require KYC but as long as our fund comes from legal means, I do not think there is something to worry of being reported as one of the money launderers.  And in sense of being free, we are not ever since we were born.  We never had the freedom to choose our gender, to choose our parents and siblings, especially to be born into a wealthy family

Why do you trust the exchange with your data and expect they would not do something illegal with it?

You cannot compare not wanting to be at the mercy of a mediator after opting to use an unregulated currency to not being able to determine your gender.

- Jay -

[livingfree]

Not new and it's in India where the news have been changing coming from banning it to lifting the ban and then now, to keep track of their users.  I do get the idea of where they're coming from because this type of policy is applicable to the banks.

But as such and exchanges, they're also considered as financial institutions and that's why they're hard on them. I guess this is a sad reality that is inevitable, as the crypto market grows, interaction with regulatory bodies are to be expected.

[o48o]

This news came on money control from India where finance minister has launched new rule under which every crypto exchange is asked to keep track of users and if there is any suspicious activity then it must be reported to the authorities.

But what's new in this? The news states that there are some harsh regulations and sections which notes that, exchangers are required to report if they also suspect any sort of money laundering that is underway. I am really not sure how this can be tracked successfully and also whether any exchanger would ever open up like this considering they will also get tangled up in the court room if the money laundering was happening on their exchanger. 

The sections that are mentioned will most deal with strict KYC compliance, anti money laundering practices and due diligence as per the banking system. More or less these are the rules which are dragging crypto currencies into harsh regulations and indirectly they are called for regulated crypto ecosystem.

This isn't news really, many countries have agreed to follow same aml guidelines and no one wants to be a country that gets left out and is flagged as country for money laundering. And while doing that it would make international trade more difficult. India of course wants to follow others if they want to fo international commerce.

And there are people tracking the funds. At this point that's not very effective but it will become more effective. But i am guessing it will become as a surprise to many that they will need to prove the origin of the money themselves. I don't think everyone is prepared for that. You can't just say "i got it from various sources or crypto things"

[Hydrogen]

The trend isn't exclusive to financial platforms being encouraged to identify and track potential money laundering. Platforms like pornhub are increasingly being encouraged screen, track and moderate user content. Internet discussion groups are also being encouraged to keep a closer eye on what type of content is being actively published. And assume a stronger role in active moderation. Even stock brokers are being encouraged to track the activities of employees as seen in the gamestop / wallstreetbets case. Whatever the trend, it would appear to be a widespread movement encompassing a number of industries.

I think this level of regulation is only made possible through the internet. It was impossible for industries to be as coordinated within a pre internet era. Previously we had radio and telephone. But it was impossible to move large quantities of data electronically using those methods. The next evolution of the internet could be mainstream satellite modems and communications such as Elon Musk's starlink.

As technology evolves, society changes and adapts with it. While it would be nice to have long and deep discussions on those topics and the future implications. I think many have lost faith in the concept of science and technology improving their quality of life. We do not feel as if we're getting ahead. It might be an issue.