LONDON (Reuters) – Anonymity allows cryptocurrencies to fund illicit activities, a senior U.S. regulator said Tuesday, creating national security risks that must be addressed said.
Christy Goldsmith Romero, a member of the U.S. Commodity Futures Trading Commission, said cryptocurrencies are being used to finance cybercrime by victims, including individuals, businesses, hospitals and critical infrastructure.
“Fraud is a hallmark of digital asset markets and human suffering may be overlooked,” Romero said at the City Week conference in London, addressing lack of visibility in crypto markets. He added that there is
“It is imperative for governments, and especially the industry, to address what makes cryptocurrencies so attractive to illicit finance, and that of anonymity,” she said.
Legally compliant cryptocurrency companies should not use “mixers” or software tools that effectively anonymize users by pooling and scrambling cryptocurrencies from thousands of addresses.
“Congress is already considering new legislation to address anonymity and digital identities,” Romero said.
Compliant cryptocurrency companies must demonstrate that they have internal controls in place to prevent money laundering and terrorist financing.
Last year, the United States imposed sanctions on cryptocurrency mixer Tornado Cash, claiming it helped hackers, including those from North Korea, launder proceeds from cybercrime.
“It is possible for all cryptocurrency companies to distance themselves from mixers and anonymity-enhancing technologies while still providing financial privacy to their customers,” Romero said.
Regulators in the United States, European Union, United Kingdom and elsewhere are looking to crack down on cryptocurrencies before global norms are agreed and introduced into the borderless sector.
“As a result, different people are doing different things, and yes, businesses are picking and choosing where to set up shop,” said Financial Stability Coordinator, G20 financial rules coordinator. Executive Director of the Board (FSB), John Schindler, said at the meeting.
The FSB will soon issue its final recommendations for regulating crypto-assets, he said.
“We are catching up with this fast-moving innovation,” added Schindler.
Additional reporting by Elizabeth Howcroft.Edited by Alexander Smith
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