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Equithy’s Joseph Bean Comments on the 2023 Digital Assets and Sanctions Compliance Conference

According to Equithy Senior Account Manager Joseph Bean, discussions that took place at the recent Digital Assets and Sanctions Compliance Center are crucial for future crypto adoption in South Africa. The conference, which took place in June, talked about regulating cryptocurrencies in South Africa and other countries.  

Conference Discusses Truth of Anonymity in Crypto Transactions 

It sheds some light on how blockchain works using a distributed ledger system and how it can eliminate anonymity during cryptocurrency transactions. Up until now, cryptocurrencies have garnered immense popularity for offering ‘complete anonymity’ to users. Many users are under the assumption that they can perform transactions without the need for in-person interactions.  

As the industry matures, investors are learning that the guarantee of anonymity is less true than it originally seemed. South African regulatory authorities Financial Intelligence Center and Financial Action Task Force have discussed the different risks posed by digital assets due to their anonymity. This specifically includes terror financing and money laundering risks.  

FIC Publishes Requirements for Service Providers  

Recently, the FIC published appropriate guidelines for crypto asset service providers. These guidelines acknowledge that the anonymous nature of crypto trading conceals the people involved in transactions.  

Although the blockchain’s distributed ledger technology provides a high level of transparency, certain techniques can be applied to conceal a client’s identity and the ownership of the crypto assets involved.  

A common example is that of tumblers and mixers, which belong to different people and hide people’s true identities. During the conference, it was made clear that the FIC is aware of such techniques in the crypto asset service provider industry. It also encourages service providers to scrutinize clients who employ such techniques to maintain anonymity.  

Service Providers Held Accountable Under FICA 

The Financial Intelligence Center responded to the Financial Action Task Force’s recommendations on digital assets. As such, it has designated service providers as accountable institutions under FICA, the Financial Intelligence Center Act.  

Under FICA, accountable institutions are required to identify clients and verify them. Moreover, it’s also required to determine the ownership of digital assets. To implement these guidelines in a digital environment, the FIC requires service providers to acquire additional information while conducting due diligence. This includes the client’s geolocation, IP address, and device identification.  

FATF Encourages Countries to Implement Travel Rule  

The Financial Action Task Force has also encouraged other member countries to implement a travel rule when monitoring digital assets. According to a review of these rules by Equithy’s Joseph Bean, service providers should gather details of the recipient and sender of a transaction and share that information with other institutions involved.  

When investors look at the guidelines and requirements set by all these organizations and the capabilities of distributed ledger technology, they may start questioning the guarantees of anonymity.  

Even so, Equithy Senior Account Manager Joseph Bean expects that being able to track down information about a sender and recipient can help in tackling concerns about money laundering and terrorist financing. And using the blockchain, crypto owners can determine where their digital assets are going. For global organizations, it could help determine the main source of funding for criminal activities.  

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