The Deputy Secretary of the US Treasury Department is hinting that new regulations could be coming to the crypto space. Wally Adeyemo made the comments during a speech at Consensus 2022, where he indicated that he is reviewing a new proposal that would require identity verification for those holding unhosted cryptocurrency wallets.
Of course, anonymity has been one of the key selling points of many crypto schemes, which ensures that the proposal is likely to ruffle the feathers of those who worry that it will infringe on people’s privacy. Adeyemo nevertheless suggested that some kind of ID check would be necessary to stop people from using unhosted accounts to move illicit funds.
As it stands, former Treasury Secretary Steven Mnuchin pitched the possibility of Know Your Customer (KYC) checks for private wallet holders all the way back in 2020, though the US government has yet to implement such a policy. The European Union, on the other hand, has already introduced KYC regulations for cryptocurrency accounts.
According to Adeyemo, some regulation is needed because lax identity verification standards make it impossible to know whether or not someone is doing business with criminals or some other sanctioned entity (such as the Russian government). As a result, unhosted crypto wallets can readily be used to get around Anti-Money Laundering (AML) regulations.
Adeyemo promised that the government would work with cryptocurrency stakeholders to ensure that any new regulations would not hinder technological innovation in the sector. He also suggested that responsible stakeholders should be working with the government to bring legitimacy to alternative financial platforms.
“I understand and respect the need for and the desire for privacy, but we need to make sure that we’re also in a place where we’re not creating avenues where those who want to move funds illicitly are able to use digital assets more than traditional assets,” said Adeyemo.
Despite the objections of technology purists, an increasing number of cryptocurrency exchanges are starting to adopt better identity verification procedures, especially as fraud has increased across crypto platforms. Many have turned to digital onboarding specialists like iDenfy and Onfido to better comply with international financial regulations.