The Internal Revenue Service has had a difficult time with cryptocurrency compliance enforcement, but in just nine days, the Financial Action Task Force on Money Laundering will require cryptocurrency businesses to verify the identities of anyone receiving or sending more than $1,000 in digital assets.
The task force will be present in nearly 200 countries and will change the face of cryptocurrency, which has remained largely anonymous up until this point.
Compliance enforcement has been difficult for the IRS and the worlds tax authorities, which have had to rely on investors to claim their cryptocurrency earnings. The task forces new rules will cause trading delays and increase costs when transactions are made.
Small- and medium-sized businesses with fewer resources will feel the impact the most. Experts suggest increased compliance costs may cause some businesses to close. Businesses will face increased scrutiny following the changes and may lose their license to transmit money if they do not comply with the FATFs rules.
"Cryptocurrency investors are not anonymous and can almost always be identified by tracing a sale back to the initial purchase of cryptocurrency by online bank transfer, credit card or wire transfer. Under Canadian regulation, Bitcoin exchanges are treated as money service enterprises and are therefore subject to FINTRAC registration and adherence to anti-money laundering legislation," explains a law firm in Vancouver.
Tax noncompliance has caused the IRS to spend significant financial resources on cryptocurrencies. The IRS has streamlined compliance procedures to allow for an easy means for investors and businesses to remain compliant.
Past regulations and restrictions have led to heavy criticism for cryptocurrency companies from customers. Central banks and finance ministers of the G20 nations have committed to the FATF guidelines. Widespread compliance would force cryptocurrency companies to remain amenable with little-to-no loopholes or the ability to move operations to a non-compliant country.
Crackdowns have started in the cryptocurrency issue, with Kik Interactive, the Canadian social media startup, being sued for $100 million by the Securities and Exchange Commission. The lawsuit accuses the company of selling unregistered tokens. The tokens, called Kin tokens, raised more than $100 million in 2017.
The fundraising option, which brought in $12 billion in funding in 2018, as the initial coin offering boom was at its height.
Kik plans to fight the SEC through DefendCrypto.org, a crowdfunding platform, which has raised $4.6 million for its defense. Kik hit a market cap of $987 million at its peak, but the token has since lost 97% of its value to fall to a total net worth of $24.5 million.
Disclosure: The author has no stake in the listed securities.
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