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Financial chief says shadow crypto trades are a challenge for regulators

Earlier today, James Lau, the Financial Services and Treasury Secretary while addressing the Financial Stability and Fintech Forum said he believed shadow crypto trades are a major issue for regulators.

Since the start of the year regulators around the world have been keen to offer some rules in the crypto space. This has been due to the rising number of scams seen in the industry where ICOs have taken investors’ money and disappeared. Also, regulators have been paranoid by the anonymous nature of cryptocurrencies and believe they are being used to fund criminal acts.

Lau says regulators will have to figure out whether Bitcoin and other cryptocurrency transactions will require counterparties to go through a KYC process. The KYC process shouldn’t be an issue if the blockchain is designed in a permissioned environment that requires participants to be screened.

Adding that KYC is a major challenge and almost impossible in cases like that of a Bitcoin Bockchain that is designed in a permissionless environment. It can be joined by anyone of any affiliation or origin. This is a question regulators will have to figure out sooner than later.

He emphasizes that regulators should also be aware of the growing number of cryptocurrencies since one can be created at any time. So far we have over 1,600 crypto coins and this number is growing every day.

He adds that cryptos like Bitcoin are favored by many due to their anonymous nature and even though experts argue that to send or receive Bitcoins one requires a pseudonym, it’s possible to make Bitcoin transactions anonymous and this raises a problem with the likes of counter-terrorist financing and anti-money laundering units.

Lau went on to address a number issues that are affected by use of financial technologies and have the potential to affect the financial security, integrity and stability.

Do you agree that shadow crypto trades are a change for regulators? Let us know in the comment section below.


Basil is a Bitcoin and blockchain evangelist with several years of writing in the tech and finance industries. Having several years of freelance experience with leading cryptocurrency and tech related sites in past, he believes strongly in the revolutionary power of the blockchain technology. You can get in touch with Basil via twitter @basil_kimathi

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