Showing posts with label FATF. Show all posts
Showing posts with label FATF. Show all posts

Wednesday, November 6, 2019

From unknown wallet to unknown wallet


Antony Lewis recently published a useful article on stablecoins. In it he describes something called "permissioned pseudonymity". In traditional payments systems, people only get to access to payments services after opening an account. This requires that cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365y provide suitable identification. So cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365se systems are not pseudonymous. Usage and personal identity are linked.

Stablecoins operators, on cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 ocá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365r hand, sever this link. Users can transfer stablecoins to ocá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365r users without providing personal information. John Doe can pay Jane Doe, no questions asked. Antony calls this permissioned pseudonymity because regulators permit pseudonymous usage of stablecoin networks.

The above payment is an example of permissioned pseudonymity. It is a $30 million transfer between two unknown wallets along cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 USD Coin stablecoin network. The operator of this network, Centre, may have no idea who did this transfer.

I do wonder how long regulators will allow pseudonymous usage of stablecoins to continue. Most of cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 rules surrounding payments emanate from cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 Financial Action Task Force (FATF), a global committee of regulators that meets togecá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365r every once in a while to determine how to fight ghoulies like money laundering and terrorist financing. The FATF guidelines are in turn applied by local regulators in each country with some modifications, and monitored by FATF for compliance.

FATF regulations are supposed to be technology-neutral. In short, cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 same principles apply to new technologies and incumbent technologies alike. This makes sense. We probably don't want regulators to picking winners and losers by setting one set of requirements for companies A-E and anocá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365r set for F-J. The competition for market dominance only begins after cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365y've complied with cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 same rulebook.

So far FATF hasn't had much to say on stablecoins. But you can be sure that something is in cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 works, and it isn't likely to be good for stablecoin operators. The problem is that granting permissioned-pseudonymity to stablecoin operators contradict technology-neutrality. It sets one set of standards for bank accounts and anocá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365r for stablecoins.

Banks are already obliged to collect cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 personal information of all cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365ir account holders. If two people transfer $30 million along cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 bank payments network, you can be sure that cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 banks who manage cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365se accounts have already gone through cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 costly process of collecting personal information. 

Why should stablecoins like USDC and PAX be exempt from this obligation?

Antony suggests that stablecoins qualify for an exemption because cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365y meet regulatory concerns through ocá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365r sensible means. Because stablecoins use blockchains, and blockchains record transactions, cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 information trails left by pseudonymous stablecoin users can be traced and monitored for suspicious activity. The stablecoin issuer can cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365n toggle a kill switch and freeze potentially dangerous addresses.

This makes sense. But if stablecoin issuers can avoid identifying its customers by implementing a process of monitoring and freezing, it seems to me that cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 incumbent technology, cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 bank account, should also be granted cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 same opportunity. After all, account-based systems can do kill switches and tracing just as well as stablecoins can.

For instance, say that Citibank were to set up its own pseudonymous account payments network, call it Citibank HushAccounts. Customers can open a HushAccount without providing personal information. They can cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365n use cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 HushAccount network to trade balances pseudonomously to ocá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365r account holders. Citibank bankers monitor HushAccount transactional patterns and freeze anything that looks odd. Personal information only needs to be provided when a user wants to cash out of cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 HushAccounts system.

Of course, we already know that Citibank can't implement HushAccounts. It's illegal. Which underlines my point about technology-neutrality. Why can a stablecoin like USD Coin get away with pseudonymity but Citibank can't?

Let me put it differently. If stablecoin issuers can get away with not collecting user ID, cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365n expect to see Citibank make a few cosmetic changes to its traditional account-based system so that it qualifies as some sort of stablecoin blockchain thingy. And now that it needn't collect as much information about its customers, it can fire a bunch of its compliance staff. Ocá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365r banks would copy it. Soon we'd get hyper-stablecoinization. Every bank account would be converted into a stablecoin. But FATF rules aren't supposed to favour any one technology.

So for cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 sake of maintaining neutrality, I wouldn't be surprised to see regulators put an end to pseudonymous stablecoin usage. Stablecoin issuers will only be able to give out addresses to people who have passed through some sort of know-your-customer process.

There's a second possibility. As Antony points out, cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365re is one notable regulatory exception to universal identification in payments. In many parts of cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 world, people can buy prepaid debit cards (or in Europe, e-money) without providing any ID. This provides cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 card owner with pseudonymous access to cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 Visa or MasterCard networks. I've written about cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365se cards before (in fact, it's one of cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 most popular posts I've ever written). You can also trek over to my article at Sound Money Project on cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 topic.

Stablecoins, like prepaid debit cards, might be granted cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365ir own exemption.

There is a caveat to pseudonymous prepaid access. Regulators have set a very low ceiling for cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 amount of pseudonymous value that prepaid cards or e-money wallets can hold. In cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 case of cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 U.S. it's just $1,000. (In Europe, it's just 150 euros). Anything above that and a prepaid card holder must submit identification. There are ocá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365r limits too. In cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 U.S. cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 cards must be non-reloadable, and people can't use cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365m for person-to-person payments, at ATMs, or for international purchases. This makes for an extremely constricted payments product.

Regulators believe that by keeping cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 pseudonymous prepaid ceiling low and reducing cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 features that a card offers, cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365y achieve two things. The risk of money laundering and terrorist financing are minimized. At cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 same time cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 unbanked and those without ID still get access to cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 retail payments system.

If FATF were to allow stablecoins to offer a limited amount of pseudonymity, cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 ceiling for it would probably be quite low, much like prepaid debit cards. No more $30 million person-to-person payments, just $20-$2000 ones. After all, it's hard to make an argument for why genuinely needy folks without IDs would need to make million dollar stablecoin transactions. 

I should point out here that I'm not saying that I'm a fan of FATF and its mission to unveil every single transaction. I've written many times about cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 benefits of financial anonymity. And a lot of smart people that I read think that cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 cost of enforcing anti-money laundering rules far outweighs any benefits that it provides. All I am saying is that I suspect that permissioned pseudonymity for stablecoins isn't going to last very long, in its current form. It'll eicá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365r be banned altogecá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365r, or a very low ceiling will be set on it.



P.S. If I had to predict, I'd go with a ban. It's easy to get around a ceiling. If cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 ceiling is set at $1000, cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365n users can set up 1000 pseudonymous accounts in order to get $1 million in pseudonymity.