CFTC proposes reducing anonymity to manage risks

The commissioner of the Commodity Futures Trading Commission (CFTC), Christy Goldsmith Romero, has projected reducing the anonymity of cryptocurrencies arsenic a means of managing the risks associated with integer assets. The connection was made during the keynote code connected Illicit Finance and Other Key Risks of Digital Finance astatine City Week 2023 successful London connected April 25.

Romero stresses the request for governments and the manufacture to tackle the superior diagnostic that makes cryptocurrencies appealing to illicit concern – anonymity. In her speech, Romero said that the risks associated with integer assets indispensable beryllium managed, arsenic marketplace integrity, nationalist information and fiscal stableness are important and cannot beryllium compromised. 

Reducing illicit concern risks successful the cryptocurrency marketplace requires addressing the situation of individuality verification, Romero said. Although the nationalist blockchain offers immoderate transparency and traceability, the use of mixers and anonymity-enhancing exertion increases the imaginable for important risk, she added. In her words:

"It is imaginable for each crypto companies to region themselves from mixers and anonymity-enhanced technology, portion inactive appropriately providing fiscal privateness for customers."

A crypto mixer is simply a work that blends the cryptocurrencies of galore users unneurotic to confuse the origins and owners of the funds. Because Bitcoin, Ethereum, and astir different nationalist blockchains are transparent, this level of privateness is different hard to achieve.

While talking astir the request for individuality verification, Romero highlighted that Blender and Tornado Cash, 2 mixers, were precocious sanctioned by the United States Treasury Department. According to her, Tornado Cash was allegedly progressive successful laundering $7 billion, which included millions of dollars stolen by Lazarus Group, a North Korean state-sponsored hacking radical that has been progressive successful cyberattacks to assistance illicit atomic and ballistic rocket programs.

Romero expressed that crypto companies tin support fiscal privateness for their customers without relying connected mixers and anonymity-enhancing technology. She continued by stating determination is simply a favoritism betwixt fiscal privateness and anonymity. Traditional concern (TradFi) ensures fiscal privateness by verifying the customer's individuality through know-your-customer (KYC), anti-money laundering (AML) and countering the financing of coercion (CFT) measures, without relying connected anonymity-enhancing technology.

Related: OFAC sanctions OTC traders who converted crypto for North Korea’s Lazarus group

Romero encouraged the verification of integer identity, urging exchanges arsenic good arsenic those offering decentralized concern (DeFi) services to verify the integer individuality of users. She pointed retired that much often than not, DeFi services are not afloat decentralized but alternatively support cardinal parties who could verify individuality and whitethorn beryllium held accountable to bash so.

According to the commissioner, determination are existing technologies to supply integer individuality and much are being developed. Congress is besides considering caller laws addressing anonymity and integer identity. The U.S. authorities volition proceed to prioritize preventing crypto’s usage for illicit finance.

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