{"id":4814,"date":"2019-11-08T13:37:57","date_gmt":"2019-11-08T12:37:57","guid":{"rendered":"https:\/\/www.newmoneyreview.com\/?p=4814"},"modified":"2019-11-27T14:14:56","modified_gmt":"2019-11-27T13:14:56","slug":"could-governments-split-bitcoin","status":"publish","type":"post","link":"https:\/\/newmoneyreview.com\/index.php\/2019\/11\/08\/could-governments-split-bitcoin\/","title":{"rendered":"Could governments split bitcoin?"},"content":{"rendered":"<p>Governments appear to want to split bitcoin into two. But will they succeed?<\/p>\n<p>In June, the Financial Action Task Force (FATF), a group of 36 governments seeking to address money laundering, <a href=\"http:\/\/beta.newmoneyreview.com\/index.php\/2019\/06\/28\/new-rules-on-cryptocurrency-transfers-may-rebound-on-governments\/\">said it wants to tighten its rules<\/a> on the transfer of virtual assets like bitcoin.<\/p>\n<p><a href=\"https:\/\/www.fatf-gafi.org\/media\/fatf\/documents\/recommendations\/RBA-VA-VASPs.pdf\">New FATF guidelines<\/a> place an obligation on cryptocurrency exchanges\u2014where the general public can convert cryptocurrencies to traditional money, and vice versa\u2014to obtain, hold, and transmit information about their users.<\/p>\n<blockquote><p>\u201cThe United States calls on all nations to join us in standing together against those who threaten the security of the international financial system\u201d<\/p><\/blockquote>\n<p>The new rules will apply to anyone sending or receiving virtual assets like bitcoin to or from an exchange.<\/p>\n<p>The objective of the guidelines, says FATF, is to force exchanges to identify and report suspicious transactions, freeze the assets of what it sees as illicit actors, or prohibit transactions with designated persons and entities. Currently, FATF blacklists two countries, Iran and North Korea.<\/p>\n<p>FATF says it will monitor the implementation of its new requirements, which are non-binding. It will conduct a 12-month review of countries\u2019 adherence to the rules in June 2020.<\/p>\n<p>Speaking in June, US Treasury secretary Steven Mnuchin said he expects other countries to comply.<\/p>\n<p>\u201cThe United States calls on all nations to join us in ensuring the FATF\u2019s standards are implemented globally, and standing together against those who threaten the security of the international financial system,\u201d <a href=\"https:\/\/home.treasury.gov\/news\/press-releases\/sm713\">Mnuchin said<\/a>.<\/p>\n<p><strong>Risk of a split<\/strong><\/p>\n<p>If fully implemented, the FATF rules could split bitcoin into two categories\u2014those with a clean history and those with a suspect one\u2014said Obi Nwosu, chief executive of London-based cryptocurrency exchange Coinfloor.<\/p>\n<p>Nwosu was speaking on the <a href=\"https:\/\/blubrry.com\/newmoneyreview\/51674564\/could-governments-split-bitcoin\/\">latest <em>New Money Review<\/em> podcast, \u2018the future of money in 30 minutes\u2019<\/a>.<\/p>\n<p>\u201cAlmost inevitably, there\u2019s a bifurcation occurring within any given cryptocurrency,\u201d said Nwosu.<\/p>\n<blockquote><p>\u201cAt some point there will be a line that identifies a coin as clean or not clean\u201d<\/p><\/blockquote>\n<p>\u201cIn bitcoin,\u201d he went on, \u201cnewly mined coins can trade at a premium over coins that have traded for some time. There\u2019s a higher confidence they\u2019ll be seen as clean by almost any jurisdiction.\u201d<\/p>\n<p>Bitcoin\u2019s underlying database, or \u2018blockchain\u2019, allows anyone to see a particular bitcoin\u2019s past transaction history.<\/p>\n<p>Coins with a long history might be perceived as tainted if it could be shown they had passed through a darknet website, or had been linked to an entity suspected of financing terrorism.<\/p>\n<p>Nwosu said this premium for newly mined bitcoin varies but could be \u201cin the low single percentage points.\u201d<\/p>\n<p>\u201cAt some point there will be a line that identifies a coin as clean or not clean,\u201d said Nwosu.<\/p>\n<p>\u201cThe problem with this is that it strikes at the heart of a currency\u2019s need to be fungible,\u201d he went on.<\/p>\n<p>In fungible currencies, users are happy to treat one currency unit and another as identical.<\/p>\n<p>\u201cThat is a big concern for the cryptocurrency space,\u201d said Nwosu.<\/p>\n<p>\u201cA lot of work is being done to increase fungibility, not to aid certain people that jurisdictions don\u2019t want to transact with, but to help the average consumer.\u201d<\/p>\n<p>But if governments push too hard on the compulsory reporting of cryptocurrency transactions, a backlash may occur in any case, as technologists introduce new privacy features, said Nwosu.<\/p>\n<p>\u201cThere\u2019s a risk that the FATF\u2019s new travel rule is going too far and could have negative effects,\u201d said Nwosu.<\/p>\n<p>\u201cWe welcome the development of new privacy technologies,\u201d said Nwosu, \u201cbut we want to see them happen with a view to allowing regulators to achieve their objectives.\u201d<\/p>\n<p>\u201cWhat we don\u2019t want to see happen is these technologies being developed without any consideration for that. That could happen if regulators don\u2019t take a balanced view.\u201d<\/p>\n<p><strong>Raising the stakes for cryptocurrency<\/strong><\/p>\n<p>David Carlisle, head of community at Elliptic, a blockchain monitoring company, said the new FATF rules have undoubtedly raised the stakes for those involved in the cryptocurrency market.<\/p>\n<blockquote><p>\u201cThere are undoubtedly points of tension\u201d<\/p><\/blockquote>\n<p>\u201cThere are undoubtedly points of tension that require a very close consideration by regulators, the industry and all stakeholders,\u201d he said.<\/p>\n<p>Carlisle is a former policy advisor at the US Treasury\u2019s office of terrorist financing and financial crimes.<\/p>\n<p>But he explained that the new FATF reporting rules don\u2019t affect cryptocurrency transactions being done on a bilateral basis.<\/p>\n<p>The podcast participants discussed a theoretical example of a North Korean bitcoin miner buying a tanker of oil from a Chinese entity, and paying in bitcoin using a direct peer-to-peer transfer.<\/p>\n<p>\u201cThe new rules wouldn\u2019t be able to stop such a transaction taking place,\u201d said Carlisle.<\/p>\n<p>\u201cWhere the FATF rules have greater effect is where an illicit actor may want to interact with a regulated entity,\u201d he said.<\/p>\n<p>\u201cIf they want to cash out their cryptocurrency, the overwhelming likelihood is that they would have to interact with a virtual asset service provider, who is obliged to comply with the FATF rules.\u201d<\/p>\n<p>\u201cThe new FATF guidance provides a robust and expansive framework to ensure there are more covered entities that need apply anti-money-laundering requirements,\u201d Carlisle said.<\/p>\n<p><em><a href=\"https:\/\/blubrry.com\/newmoneyreview\/51674564\/could-governments-split-bitcoin\/\">Click here<\/a> to listen to the latest New Money Review podcast.<\/em><\/p>\n<p><em>Don\u2019t miss any more New Money Review content:\u00a0<a href=\"http:\/\/eepurl.com\/du6eTr\"><strong>sign up here<\/strong><\/a>\u00a0for our newsletter<\/em><\/p>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Governments appear to want to split bitcoin into two. But will they succeed? In June, the Financial Action Task Force (FATF), a group of 36 governments seeking to address money [&hellip;]<\/p>\n","protected":false},"author":4,"featured_media":4816,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_exactmetrics_skip_tracking":false,"_exactmetrics_sitenote_active":false,"_exactmetrics_sitenote_note":"","_exactmetrics_sitenote_category":0,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[1013,1012,1053,1011],"tags":[1041,1591,1404,1496,1038,1237],"class_list":{"0":"post-4814","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-account","8":"category-exchange","9":"category-featured-1","10":"category-value","11":"tag-coinfloor","12":"tag-david-carlisle","13":"tag-elliptic","14":"tag-fatf","15":"tag-obi-nwosu","16":"tag-us-treasury"},"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v24.3 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Could governments split bitcoin? - New Money Review<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/newmoneyreview.com\/index.php\/2019\/11\/08\/could-governments-split-bitcoin\/\" \/>\n<meta property=\"og:locale\" content=\"en_GB\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Could governments split bitcoin? - New Money Review\" \/>\n<meta property=\"og:description\" content=\"Governments appear to want to split bitcoin into two. 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