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Crypto: Making the World think twice about AML policies 

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Cryptocurrencies have caught regulators wrong footed

According to Chainalysis, “there is a 1,964% year-over-year increase in the total value of cryptocurrency laundered through DeFi protocols, reaching a total of $900 million in 2021”. This shows the growing demand for AML policies in the crypto space. Crypto exchanges are doing pretty well in terms of Know-Your-Customer client guidelines but nothing much to control money laundering.

In the crypto space, added anonymity is something that’s discussed the most. From the decentralized nature of blockchains to the virtual environment in which digital currencies exiss, everything works together to attract cybercriminals. This along with many other important reasons raise questions about the socioeconomic ethics and legal compliance of this new financial system.- Advertisement –

It doesn’t matter what industry experts, leaders, and enthusiasts have to say, the digital currency proves to be a blessing for those who want to obscure the source of their unlawful proceeds which includes everything from buying illicit goods to ransomware attacks. Therefore, cryptocurrencies have received huge criticism regarding money laundering and other illegal financial proceeds.

Anonymity, ease of use, and borderless reach are the three essential ingredients for online money laundering, and digital currencies have got all of them. To make things work, money launderers take advantage of Bitcoin exchanges and Bitcoin mixing services. Such services provide users with a new and unique Bitcoin address to make deposits. The service provider pays out the recipient from its reserves and manipulates the amount and frequency of transactions to twist the legitimacy resulting in cash outs disassociated with illegal activities. What’s more surprising is that the sky is the spending limit.

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The government of Pakistan has recently expressed an immense resistance to use of crypto-currency in any form within the country. The State Bank of Pakistan (SBP) and the Central Bank have proposed a ban on cryptocurrency. Others supporting the proposal include the Ministry of Finance, SECP, and FIA.

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According to the submitted proposal, there has been a huge risk of money laundering and terror financing through cryptocurrencies. It all started after the FIA investigated the suspected scam made by a local arm of Binance in the country. Waqar Zaka, a prominent media personality and crypto entrepreneur in Pakistan, is at the forefront of allowing crypto in the country and has made significant efforts as he continues to believe that digital currency is the only solution to resolve the country’s financial crisis.

At the same time, it is also evident that crypto has now become a global revolution. Any actions taken by only a few or one country against it won’t leave a huge impact on the worldwide crypto space but the country could be left behind others. According to many industry experts, banning crypto in Pakistan might become a huge mistake because it has unique benefits and use cases as well. A recent publication by CoinDesk highlights that many industry leaders are expecting the government to introduce adequate regulations instead of banning cryptocurrency.

Keeping in mind the staggering number provided by Chainalysis, there is a lot of room for money launderers but still, they need intelligent ways to get through it. These cryptographically recorded transactions are publicly recorded and accessed which means each one of them is traceable.

It cannot be denied that governments and regulatory bodies are making sufficient efforts to control money laundering in the cryptocurrency space. While taking a closer look at the rapidly evolving legislative reforms around the world, it can be concluded that the latest AML developments are all focused to bring realistic and effective resolutions. In addition to that, crypto exchanges are also trying to effectively address the rising concern of money laundering within the system which may help in determining the best actions and systems to control illicit digital/cryptographic financial transactions. 

Most of the crypto exchanges and virtual asset service providers (VASPs) globally operate with considerably less scrutiny and verification process due to which money launderers and cyber criminals prefer it to be the best place to move their ill-gotten funds.

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To better combat money laundering in the crypto segments, governments, law enforcement agencies, regulatory bodies, and industry experts are investing huge time and money to get to the resolution. Yes, it might take some time but industry stakeholders are hopeful to get a complete hold of money laundering in crypto.

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The current global financial system is fully governed and controlled by the governments, their regulatory bodies, and an international association of key industry stakeholders. It is governed and regulated by a set of universal policies, legislations, and legal bindings which also includes the anti-money laundering (AML) laws and regulations.

In the crypto space, AML refers to having a similar set of legal obligations and policies that can identify, track, resolve, and eliminate money laundering in digital currencies. It might look like developing just another set of statutes from scratch but a few elements have made it a huge dilemma for everyone in the crypto world.

The Financial Action Task Force (FATF), US Financial Crimes Enforcement Network (FinCEN), The European Commission, and regulatory authorities from other countries are in the pursuit to introduce new effective regulations that can control money laundering in the cryptocurrency space.

On October 6, 2021, US Deputy Attorney General Lisa O. Monaco made an announcement about the creation of a National Cryptocurrency Enforcement Team (NCET) with a primary focus on dealing effectively with criminal/unlawful use of cryptocurrency, more specifically in terms of virtual currency money laundering, mixing and tumbling services — and other similar activities.

What are the prominent AML developments in Crypto?

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In the USA, the National Defense Authorization Act (NDAA) includes the Anti-Money Laundering Act of 2020 which encompasses many new reforms made in accordance to effectively address money laundering in cryptocurrencies and other digital assets. The European Union has also proposed a recast of many regulations to extend its anti-money laundering scope to transfers of crypto-assets.

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On December 1, 2021, Slovenian Finance Minister Andrej Šircelj said, “Today’s agreement is an important step towards closing the gaps in our financial systems that are malevolently used by criminals to launder unlawful gains or finance terrorist activities. Crypto-assets are more and more at risk of being exploited for money laundering and criminal purposes, and I’m glad the Council could make swift progress on this urgent proposal”.

Another notable reform made to the existing AML Act is the revision of the Bank Secrecy Act (BSA) which also covers the Corporate Transparency Act of 2019, the Illicit CASH Act of 2020 and the STIFLE Act of 2020. This includes an amendment of Section 5312 which now explains “money instrument” as “value that substitutes for any monetary instrument.” This along with many other key legislative reforms reflect considerable progression in terms of developing and imposing improved AML regulations and policies globally.

In addition to that, financial institutions are now required to provide key customer information to FinCEN in case of any transaction that exceeds a cryptocurrency worth of $10,000 on their platform as well as unhosted wallets that can bypass the conventional financial institutions and their controls over the transactions. Moreover, Banks and Fintechs are also required to record such transactions and cash flows that exceed a cryptocurrency worth $3,000.

It cannot be denied that governments and regulatory bodies are making sufficient efforts to control money laundering in the cryptocurrency space. While taking a closer look at the rapidly evolving legislative reforms around the world, it can be concluded that the latest AML developments are all focused to bring realistic and effective resolutions.

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In addition to that, crypto exchanges are also trying to effectively address the rising concern of money laundering within the system which may help in determining the best actions and systems to control illicit digital/cryptographic financial transactions.

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Rising from the Desert: How the UAE is Shaping the Future of Crypto

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Cryptocurrency on Mobile App

The sun-drenched sands of the United Arab Emirates are no longer solely synonymous with oil wealth and towering skyscrapers. In recent years, the UAE has emerged as a frontrunner in the global race to embrace and regulate the burgeoning world of cryptocurrencies and digital assets. With the MENA region accounting for 7.2% of global crypto transaction volumes, equating to nearly $400 billion, the UAE is at the forefront of establishing the standards that will define the future of this revolutionary technology.

From Skepticism to Embrace: A Rapidly Evolving Landscape

Just a few years ago, the UAE’s stance on cryptocurrencies was cautious, mirroring the general global uncertainty surrounding the nascent asset class. However, a forward-thinking vision and a keen understanding of the potential of this digital revolution led to a dramatic shift in approach. In 2022, Dubai established the Virtual Asset Regulatory Authority (VARA), the world’s first dedicated regulator for virtual assets. This decisive step sent a clear message: the UAE intended to not only embrace crypto but also become a global leader in shaping its development.

Building a Robust Regulatory Framework: The Cornerstone of Success

VARA’s establishment marked a turning point. Unlike many other jurisdictions grappling with a patchwork of regulations or outright bans, the UAE took a proactive approach. VARA’s comprehensive rulebook outlined clear guidelines for operating within the crypto space, addressing concerns about money laundering, market manipulation, and consumer protection. This transparent and well-defined regulatory framework instilled confidence in both investors and established financial institutions, paving the way for the UAE’s crypto ecosystem to flourish.

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A Magnet for Innovation: Fostering a Thriving Crypto Hub

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The UAE’s commitment to creating a welcoming environment for crypto businesses has attracted a diverse range of players to its shores. From established financial giants like Binance and FTX to innovative startups developing the next generation of blockchain solutions, the Dubai International Financial Centre (DIFC) and other free zones have become vibrant hubs for crypto activity. This influx of talent and expertise has fostered a collaborative and dynamic ecosystem, where innovation thrives and new ideas rapidly take shape.

Beyond Regulation: Education and Infrastructure for Sustainable Growth

The UAE’s vision extends beyond simply providing a regulatory framework. Recognizing the importance of building a knowledgeable and engaged crypto community, the government has launched numerous initiatives to educate the public about digital assets. Universities are offering specialized courses in blockchain technology, while government-backed hackathons and conferences connect entrepreneurs and investors, further fueling the ecosystem’s growth.

Challenges and Opportunities: Navigating the Uncharted Waters

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Despite its remarkable progress, the UAE’s crypto journey is still unfolding. Issues like market volatility, the potential for cybercrime, and the need for global regulatory coordination remain challenges that need to be addressed. Nevertheless, the UAE’s proactive approach and willingness to adapt position it well to overcome these hurdles. By continuously refining its regulatory framework, fostering innovation, and collaborating with international partners, the UAE can solidify its position as the preeminent global hub for responsible and sustainable crypto development.

The Ripple Effect: Shaping the Future of Global Crypto Standards

The UAE’s pioneering efforts are not confined within its borders. Its clear regulatory framework and commitment to best practices are serving as a model for other nations seeking to navigate the uncharted waters of crypto regulation. As more countries consider establishing their regulatory frameworks, the UAE’s experience and expertise are likely to be closely studied and emulated. In this way, the UAE’s leadership role in shaping the future of crypto extends far beyond its geographical boundaries, influencing the development of global standards that will impact the industry for years to come.

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Conclusion: A Beacon of Innovation in the Crypto Landscape

The UAE’s rapid rise to prominence in the world of cryptocurrencies is a testament to its forward-thinking vision and unwavering commitment to innovation. By establishing a robust regulatory framework, fostering a thriving crypto ecosystem, and actively promoting education and collaboration, the UAE has positioned itself as a leader in shaping the future of this transformative technology. As the global crypto landscape continues to evolve, the UAE’s unwavering ambition and unwavering commitment to responsible development promise to make its mark on the future of finance and reshape the way we interact with the digital world.

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Ethereum Restaking Poised to Take Center Stage in 2024 Crypto Scene

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round gold colored ethereum coin

With the dust settling around the anticipated Bitcoin ETF approval, a new contender emerges for the hottest crypto narrative of 2024: Ethereum restaking. Eyes are turning towards this innovative financial tool as analysts predict it could be the next big driver of growth in the crypto market.

What is Ethereum Restaking?

In simple terms, restaking allows investors to earn additional yield on their already staked Ethereum (ETH). Traditionally, ETH holders can stake their tokens to support the Ethereum network and earn rewards. Restaking platforms take this a step further by leveraging these staked tokens in DeFi protocols, generating even higher returns for investors.

Why is it gaining traction?

Several factors are fueling the excitement around Ethereum restaking:

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  • Increased DeFi Adoption: The explosive growth of DeFi offers new ways to utilize staked ETH, unlocking hidden earning potential. Restaking platforms bridge the gap, making participation accessible and profitable for everyone.
  • Enhanced Yields: Compared to standard staking, restaking promises amplified returns by exposing ETH to various DeFi strategies. This prospect is incredibly attractive, especially in a bear market where investors crave higher yields.
  • New CoinGecko Category: The recent addition of a dedicated “restaking token” category on CoinGecko further validates the emerging trend. This provides increased visibility and potentially attracts fresh capital to the sector.

Early Movers Gaining Momentum:

Leading restaking platforms like Pendle Finance (PENDLE) and Picasso (PICA) have already witnessed significant price surges amidst the growing hype. PENDLE alone saw a 20% jump in value within a day, demonstrating investor confidence in the market’s potential.

Not Without Risks:

Despite the optimism, it’s crucial to acknowledge the inherent risks associated with restaking. DeFi protocols involve complexities and potential security vulnerabilities. Moreover, the nascent nature of the restaking market carries additional uncertainty.

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A Promising Horizon:

While challenges remain, the potential of Ethereum restaking cannot be ignored. It offers a compelling solution for maximizing passive income on staked ETH and unlocking the power of DeFi for a broader audience. Whether it becomes the defining narrative of 2024 remains to be seen, but one thing is certain: Ethereum restaking is definitely worth watching.

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The Dark Side of Bitcoin ETFs: Why They Could Be the Next Big Threat to the Cryptocurrency Market

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Introduction

Bitcoin exchange-traded funds (ETFs) have been a hot topic in the investment world for the last few years. The idea of having a regulated investment product that tracks the price of Bitcoin, without the need to hold the cryptocurrency directly, has been appealing to many investors. However, there are also concerns and criticisms surrounding Bitcoin ETFs. Some argue that such funds could lead to market manipulation and volatility. Others question the security of such funds and the lack of transparency in the underlying assets. Despite the potential benefits, the debate around Bitcoin ETFs continues, and investors should carefully consider the pros and cons before investing in them.

Changing the Nature of Bitcoin

One of the main criticisms of Bitcoin ETFs is that they could change the nature of Bitcoin itself. Satoshi Nakamoto, the creator of Bitcoin, envisioned it as a decentralized, peer-to-peer electronic cash system. However, if Bitcoin ETFs are approved, they would introduce a centralized financial product into the market. This could compromise the freedom and security supposedly offered by Bitcoin’s decentralization.

Market Manipulation

The possibility of Bitcoin ETFs being used to manipulate the market is a concern that has been raised by the Securities and Exchange Commission (SEC) due to the potential for market manipulation in the cryptocurrency space. Although the approval of Bitcoin ETFs would bring a new level of legitimacy to the cryptocurrency market, it could also make it vulnerable to market manipulation. This could potentially hurt the entire cryptocurrency market, as investors may lose confidence in the digital currency space. As such, it is important for regulators to thoroughly consider and evaluate the potential risks before approving any Bitcoin ETFs.

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Bubble in the Cryptocurrency Market

Furthermore, some analysts believe that Bitcoin ETFs could lead to a bubble in the cryptocurrency market. If investors pour large amounts of money into Bitcoin ETFs, it could drive up the price of Bitcoin to unsustainable levels. This could lead to a crash in the market, similar to the dot-com bubble of the late 1990s.

Arguments in Favor of Bitcoin ETFs

Despite these concerns, there are also arguments in favour of Bitcoin ETFs. For example, they could make it easier for institutional investors to gain exposure to the cryptocurrency market. This could lead to increased liquidity and stability in the market.

Conclusion

As the debate around Bitcoin ETFs continues, many are weighing the potential benefits against the risks and criticisms. While such ETFs could bring more investors into the cryptocurrency market and increase liquidity, they also raise concerns about security, volatility, and the potential for market manipulation. Additionally, regulators are still grappling with how to regulate cryptocurrencies and ETFs, which adds uncertainty to the approval process. If approved, Bitcoin ETFs could have a significant impact on the market, but it remains to be seen how they will be received and whether they will meet the necessary regulatory requirements. Ultimately, investors will need to carefully evaluate the risks and potential rewards before making any decisions.

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FAQs

What is a Bitcoin ETF? 

A Bitcoin ETF is an exchange-traded fund that tracks the price of Bitcoin. It allows investors to gain exposure to the cryptocurrency market without having to purchase and store actual bitcoins.

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What are the criticisms of Bitcoin ETFs? 

One of the main criticisms of Bitcoin ETFs is that they could change the nature of Bitcoin itself. Another concern is that Bitcoin ETFs could be used to manipulate the market. Furthermore, some analysts believe that Bitcoin ETFs could lead to a bubble in the cryptocurrency market.

What are the arguments in favour of Bitcoin ETFs?

 They could make it easier for institutional investors to gain exposure to the cryptocurrency market, which could lead to increased liquidity and stability in the market 1.

When will Bitcoin ETFs be approved?

It remains to be seen whether they will be approved by regulators and how they will impact the market if they are.

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What is the difference between a Bitcoin ETF and a Bitcoin futures ETF? 

A Bitcoin ETF lets traders easily gain exposure to the biggest cryptocurrency via traditional brokerage accounts and stock markets, without needing to directly buy or sell the digital asset on a crypto exchange. Bitcoin futures ETFs, on the other hand, hold derivatives contracts whose value is tied to Bitcoin.

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