In 2017, thousands of computer systems were held ‘hostage’ in what was widely known as the ‘Wannacry’ ransomware attack, where bitcoins were demanded as a ransom from the victims.
This ransomware attack resulted in damages estimated at US$8 billion to hospitals, banks and businesses globally. Today, ransomware attacks and other cryptocurrency related crimes are on the rise.
There are a myriad of technological benefits in which cryptocurrencies can bring into our lives. They steamline payments by making it faster and cheaper, and enable those without a traditional bank accounts an easy access to the digital financial world.
However, such technological advancements are also vulnarable to criminals exploiting them as virtual safehavens for illegal financial transactions. Regulation of the virtual asset sector is essential and may not always catch up with technology developments in the cryptosphere.
Whilst some countries are taking steps to regulate the virtual asset sector, many others outright prohibited virtual assets altogether. For those countries in between, they have so far allowed cryptocurrency companies to operate within the grey area.
Banks traditionally have brick and mortar headquarters and a client base within close proximity of its offices. Virtual asset companies on the other hand, commonly have a presence and a client base that spans the globe.
Therefore, where do the standards apply and who should be regulating them?
Regardless of the location of the server, or where it does business, it is the country that has incorporated the virtual asset service provider as a company, that is its main supervisor.
Virtual asset companies must therefore Implement the same preventive measures as traditional financial institutions, such as a robust client due diligence framework, record keeping and reporting of suspicious transactions.
We are increasingly working with cryptocurrency companies and exchanges in implementing robust AML/KYC frameworks in line with FATF standard, along with guidance for license applications in various jurisdictions.
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