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It is this very characteristic that made bitcoin popular with drug dealers and tax evaders, who were able to transfer money without revealing their name or location.
But the fact that US authorities were able to track the Colonial Pipeline ransom as it ricocheted off various accounts owned by DarkSide, the hacking collective, shattered that belief.
This is clear evidence that law enforcement agencies themselves are becoming much more adept at tracking and seizing illicit funds in virtual wallets.
But that’s not the only challenge cryptocurrencies face.
There is growing evidence that financial regulators are increasingly aware of the need to separate traditional financial institutions from cryptocurrencies.
Major global financial institutions are facing increased pressure to provide cryptocurrency services after increased customer demands, and some offer a limited suite of crypto services.
But banking regulators seem to take a dim view of this development.
Last week, the Basel Committee on Banking Supervision, which consists of representatives from the U.S. Federal Reserve, the European Central Bank and other major central banks, proposed new rules that would see cryptocurrencies subject to the strictest bank capital rules of all assets.
The Basel committee acknowledged that banks’ exposure to cryptocurrencies was limited at this point, but warned that the growth of crypto assets and related services could potentially raise financial stability issues and increase the risks banks face. are facing.
He proposed a new conservative prudential regime for crypto assets such as bitcoin and ethereum, with a 1250% risk weight.
This would essentially require banks to set aside a dollar of capital for every dollar of bitcoin they own.
The stronger stance taken by the global banking regulator comes amid growing national oversight of cryptocurrencies.
Last month, the Biden administration proposed new rules that would require cryptocurrency transfers over US $ 10,000 to be reported to US tax authorities.
The move came shortly after the Chinese central bank asked financial institutions not to accept cryptocurrencies as a form of payment or to offer related services.
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