The entire cryptocurrency market has lost two-thirds of its value within a short time. In addition, there are various breakdowns at crypto service providers such as crypto wallets like metamask and coinbase (check out the metamask vs coinbase wallet for opensea comparison here). What does that mean?
The current crisis in the crypto market even has something good, says Urban Angehrn, head of the Swiss financial market supervisory authority Finma. “This crisis, if it really is one, is a salutary moment for this industry to let go of the hot air.” In his opinion, however, this is by no means the end of the crypto industry.
“It could very well be a sign of a coming consolidation.” Financial stability is not at risk and no impact on regulation or supervision is expected at the moment, he says. Finma focuses on criminal crypto activities in general, in particular money laundering.
Angehrn speaks of a double-edged sword: “A transfer of cryptocurrencies takes place very quickly, anonymously, and internationally. These are bad conditions for the prevention of money laundering.” On the other hand, it is an advantage that all transactions are traceable on an open blockchain. This makes tracking easier.
High number of unreported cases
Because money is laundered across borders, it is difficult to quantify how much Switzerland is actually affected. Globally, however, less than one percent of all crypto transactions in 2021 were criminal in nature, less than ever before, as reported by the company Chain Analysis, which investigates money laundering and crime in the digital space.
And although proportionately little, it is still 14 billion dollars in illegal money that is still moved annually worldwide via cryptocurrencies. The number of unreported cases is likely to be even higher. The authorities and financial intermediaries could do more. Like the criminals themselves, they could make greater use of technological possibilities.
However, the tracing of information stored forever is complicated, explains Angehrn. “Carrying out money laundering is usually not a transfer, but a whole scheme of several connected transactions with several people through several financial intermediaries. You have to study this complex scheme with a lot of time and patience to see the pattern.”
This is a kind of forensic work, according to Angehrn. Artificial intelligence could help to do this detailed work in the future. In addition, internationally uniform regulation and monitoring is also being discussed. At the end of June, EU countries agreed on a law to make crypto transfers traceable.
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Switzerland’s pioneering role
In the future, crypto platforms will have to determine information about senders and recipients when processing transactions. It is quite groundbreaking that the EU wants to regulate uniformly and establishes international standards in this area.
In Switzerland, this type of regulation has existed since 2019. At the time, Finma introduced that crypto transactions must be traceable. Drug cartels and other money launderers are likely to have a harder time throughout Europe in the future.
If they want to exchange Bitcoin or Ether for cash, they tend to become identifiable thanks to the new regulation. In the future, criminal organizations will probably increasingly switch back to the traditional suitcase full of cash in order to remain truly anonymous.