FATF, AMLD5, and Global Compliance: Advanced Topics in Cryptocurrency Regulation

FATF, AMLD5, and Global Compliance: Advanced Topics in Cryptocurrency Regulation. In this piece, we will discuss what crypto regulations are, why they’re important and why they’re a nuisance. A truly unbiased piece from both sides of the coin.

I’ll also discuss how to avoid these regulations if you wish to. Let’s get started? 

Understanding basic crypto regulations as of 2024

Cryptocurrencies are still fairly new for the world. As a result, it’s not exactly “regulated” like fiat or even gold. Some countries have very differing views on Cryptocurrency than others. 

For starters, know that Cryptocurrencies aren’t illegal. Well, except a few very conservative countries such as China and Algeria. 

In countries like India, it’s a grey area because while Crypto hasn’t been entirely “legalised” yet, the government still demands a tax on trading and profits! 

Then there are the most Crypto-friendly nations. Nations like Japan, Germany, Switzerland, and El Salvador have made very crypto-friendly laws. In fact, El Salvador is the first country that made crypto a legal tender! The President, Nayib Bukele has been known to be one of the loudest pro-crypto vocalists on the planet. 

All in all, Crypto regulations are a grey area and need diverse research to be understood fully. Keep reading for a better idea or use tools like altrix edge for better insights. 

What is FATF and its role in Crypto regulations? 

FATS stands for Financial Action Task Force. As the name hints, it’s a group that controls financial activities. 

FATS is an international organisation. Meaning, no one country holds dominance over it and its rules are followed by all countries that consider it a legal task force. 

The primary goal of FATS is to prevent money laundering, terror-financing or any other illegal activity that may arise with the help of Cryptocurrencies. 

FATS issues guidelines and pointers that countries may implement to counter such illegal activities. The very popular (and frustrating) KYC requirement by exchanges and  other crypto platforms is one such guideline. 

What is AMLD5 and its role in crypto regulations? 

The Fifth Anti-Money Laundering Directive is what AMLD5 is. Again, the name makes it pretty clear what it is and why it exists, doesn’t it? It’s not exactly international and mostly centered around the EU jurisdiction.

Unlike the FATF, the AMLD5 doesn’t just issue guidelines but almost rules that institutions must follow to stay legal.

The rules are mostly about implementing KYC, requiring due diligence, sharing information with agencies when required and so on.

What is the need to regulate Crypto? 

One may ask, what is even the need to regulate crypto? Well, the importance of organizations such as the AMLD5 and FATF becomes clearer when this need is understood.

These needs also are what most pro-regulation bodies cite when trying to enforce said regulations.

• Anonymity & privacy: While crypto isn’t exactly “anonymous” (except some coins), it’s way more private than most other forms of payment or assets. This creates a problem for the government. as they’re unable to monitor the movement of the assets or how the funds are used. 
• Volatility: Cryptocurrencies are extremely volatile. Without regulations, innocent or less educated citizen may take it on as a gamble and may have serious consequences.
• Threat to banks and governance: A majority of the power of the govt. has is because of its banks. Crypto poses a major threat to banks. Banks pay out a negligible interest, charge mammoth interests, and have control over your money. The moment people shift to Crypto, the banks would lose all this control (and money). It’s why Taxis hated Uber & Ola.
• Illegal activities: It’s easier to finance illegal activities with crypto than it is with real money. 

Why crypto shouldn’t be regulated? 

My personal preferences aside, every article here at Updateland is unbiased. Hence, we’ll discuss both sides of the coin.

• Loss of privacy: The entire point of Cryptocurrencies is more privacy and anonymity to some degree. Regulating crypto would essentially be opposite to exactly what it’s used for.
• It’s already transparent: One of Crypto’s biggest features and flaws is that it’s transparent. Every single transaction on the Blockchain can be traced back to its previous transactions all the way to its origin. Hence, additional regulations may not be required. 
• Free will: You as an individual should be free to make your own decisions, even if they’re mistakes. 
• Makes adoption hard: Crypto is massively moved by “market sentiment”. This sentiment negatively moved the harsher any govt. Wishes to regulate crypto. This makes others sceptic and a chain reaction is ignited crashing the market and encouraging other governments for hindrance. 

Conclusion- FATF, AMLD5, and Global Compliance: Advanced Topics in Cryptocurrency Regulation

That’s about it. If you went through the fine print, I hope you’ve got a better idea of Crypto regulations now then you did a few minutes back.

All in all, regulations, when done within check and with truly good intentions in mind, can add to crypto adoption and advancement.

However, governments are afraid of banks falling and their citizens leaving their nations for better opportunities. And, politicians are seldom “good-willed”. 

If you’d like an ease on your crypto portfolio, I’d advise moving to a better region/nation, using accounts from more crypto-friendly nations or just being really careful with your funds.