Cryptocurrency is going to become more regulated in the future

In the fight against global money laundering, it is cryptocurrency that remains the weak spot. Since the users can get payments from several unknown sources from any part of the world, it becomes hard to track. Committing crimes like cyber attacks, drug trafficking using cryptocurrency is no longer uncommon.

Until recent times, converting illegally earned cryptocurrency into monetary forms that are widely accepted had been tough. Not many merchants are comfortable accepting cryptocurrency. Before taking such money into the core banking system, it is necessary to use foreign exchange conversion tools and wallets.

So, criminally obtained cryptocurrency remains contained as far as real-world spending is concerned. Dealing with large amounts of money obtained through the so called dark economy has the risk of crashing the crypto market and that prevents many people from taking such money out.

However, this situation is not going to prevail forever. A behemoth of the mainstream online monetary transaction system, the Visa network has opened a door to cryptocurrency-funded debit cards. While others have attempted to launch such cards, they did not succeed owing to compliance reasons.

Visa has tied up with Coinbase for a unique UK crypto card. The cryptocurrency exchange is of the view the card will let the customers spend money from the cryptocurrency wallets at any place where Visa is supported-which means almost everywhere. The spending limit is £10,000 a month and for some users, it can be doubled.

This inevitably raises the question how Coinbase was able to comply with anti-money laundering norms and KYC regulations. The regulatory environment for crypto is set to change, and this new development is a proof of such changes. A few wallet providers have found ways to comply with online money exchange and conversion norms. However, technically sophisticated cyber criminals still exist and they seek existing loopholes.

Theoretically, anyone having a Coinbase account can receive payments from illegitimate sources without facing many hassles now. Visa, on its part, says the partnership is subjected to increased scrutiny and Coinbase is under regulation of US authorities. Coinbase has a system of blocking accounts with suspicious activities but the system may not be absolutely accurate.

Even if such popular crypto exchanges and wallets ultimately comply with KYC norms at the time of opening an account, the anonymous nature of cryptocurrency thwarts their ability to oversee of transactions afterwards. One solution is to routinely block payments coming from wallet addresses used by the unregulated players.

This will of course incur huge costs and go against ideological tenets of crypto sector. The concept of cryptocurrency is based on allowing an anonymous and parallel value network, which can exist and operate outside the core banking system. Even in the mainstream banking system, risk and cost of dealing with correspondent banks that act in noncompliant ways has led the authorities to purge banking relations.

If the core banks cannot sustain such relationships, it will be even harder for the crypto ones. Managing crypto exchange is a costly proposition, as it is. However, there is no denying the reality that compelling crypto institutions to function like the core banking system is a necessity if they are allowed access to the system through the Visa network. That is the only way to ensure a level playing field is maintained.