The basis of any exchange of value is trust. The more the two parties trust each other, the more they will feel confident in transactions. Not only is it to engage in a high volume of transactions, but also in higher value transactions.
Bitcoin (BTC) and other cryptocurrencies certainly accomplish a lot when it comes to creating a decentralized environment in which the ability to trust another party is taken out of the equation by a blockchain. Hardcore enthusiasts who already understand this are the most willing to break into their vaults and pour money into the crypto revolution. The truth is, however, that the average consumer is not yet at this stage.
Some libertarians probably don’t want to hear this, but for the crypto world to achieve critical mass it needs much wider adoption, and the average consumer will need another layer of protection in place. They need a set of rules and someone to complain about when things go wrong.
Blockchain technology certainly does an amazing job of allowing participants to exchange value in a trustless environment. If you don’t share your private keys, no one can steal your value. Teaching this to newly created crypto holders is fundamental to getting them to buy.
While many view this next step as a barrier to adoption, regulation in the crypto space will most certainly accelerate it. The more layers we add to the consumer safety net, the more confident new investors and adopters will be in their involvement.
The Bank Secrecy Act came into effect in the 1970s and is the first major piece of legislation in the United States relating to the fight against money laundering and the financing of terrorism. Essentially, it forces banks to cooperate with the US government to fight financial crime. Following the terrorist attacks on the World Trade Center in September 2001, the Patriot Act was born, further opening the lines of communication between banks and governments in the same spirit.
Fast forward to 2019, an international governing body called the Financial Action Task Force is expanding the travel rule to include not only banks, but virtual assets and exchanges as well. The rule states that virtual asset service providers must share the identity of users who trade in assets worth $ 1,000 or more.
In recent days, the Conference of State Bank Supervisors, a regulator representing all U.S. states and territories, announced the launch of a new regulatory framework for payment companies, money services businesses, and credit card companies. cryptocurrency. Only Montana, the District of Columbia, and Puerto Rico are not included in the launch.
This new framework requires major payment providers such as Western Union, PayPal, and 76 other money services and crypto-related businesses to undergo a thorough review of their AML practices. In total, this new framework will regulate the payment services which are responsible for the annual transfer of more than $ 1 trillion in customer funds.
Ultimately, this launch and the wider impact of the FATF Travel Rule will serve to hold businesses and market players accountable for tracking transaction data, engaging in appropriate KYC protocols, and serving both old and new crypto adopters with additional layers of protection that make the investment. in crypto-currencies, a more welcoming proposition.
Increased regulation and enforcement is the path leading to exponential increases in digital asset adoption, now and in the future. And it inevitably happens.