What a difference a year makes. Just eighteen months ago, leading global bankers were describing cryptocurrencies as “a worse [bubble] than tulip bulbs” – and now Goldman Sachs has launched its own crypto trading desk, while JP Morgan is planning its own crypto coin. These leading banks are simply following the market, with a host of leading companies, including Expedia, WeWork and Microsoft announcing they now accept payments in crypto. With popularity soaring, it is time for crypto KYC to become a common process.
Recent surveys show it’s not just the big players getting involved. In February 2021, transactions using Etherium reached 1.2 million per day globally, while Bitcoin transactions also hit 272,000 per day. Taken together, that’s 44 million transactions a month on just two of the hundreds of cryptocurrencies available to consumers.
“40% of consumers intend to pay with crypto in the next twelve months.”
The major payments networks are also making paying with crypto easier – in the last year, Visa, Mastercard, PayPal and Square have made it possible for merchants to accept crypto for payment purposes. In the last two weeks, Mastercard released the results of a survey which reveals that 40 percent of global consumers plan to use crypto in the next twelve months.
Get Ready For Crypto KYC Regulation
As crypto becomes more widely used, regulators are taking notice – especially given its reputation for secrecy and privacy. In the US, Congress are preparing a comprehensive Cryptocurrency Act by the end of 2022, having already updated updated the National Defense Authorization Act with provisions for cryptocurrency. Meanwhile, the US Treasury’s FinCen (Centre for Financial Crime) has stated that the so-called “travel rule” for fiat currency transactions – under which transaction originators and recipients must be declared and identified – will now be extended to crypto.
Similar moves are afoot in Europe, with the European Commission’s Regulation of Markets in Crypto-assets (MiCA) proposal aiming to regulate crypto assets and service providers and provide a single licensing regime across all member states by 2024. The development of regulation should serve to enhance both consumer and investor confidence in crypto, making it even more likely to be used for payment.
“Developing regulation around crypto will boost consumer confidence and make if more likely to be used for payment.”
That said, it is certain that the regulations currently being prepared are going to place greater burdens on both banks and merchants in terms of Know Your Customer (KYC) and Anti-Money Laundering (AML) legislation. In particular, banks will be required to be able to prove the identity of transmitting and receiving parties for crypto transactions, and we can expect these requirements to be at least as stringent as those currently in place for standard national currencies. Cryptocurrencies are part of the future of finance, and represent a great opportunity – but preparation for future regulatory strictures is essential.
To find out more about the steps your financial institution should take to prepare for crypto KYC, you can contact us here.