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"In this paper, we discuss the intricacies of blacklisting, how it would change the Bitcoin ecosystem and how it can remain effective in the presence of privacy-preserving cryptocurrencies. We hope this paper provides a starting point for discussions among researchers, regulators and the cryptocurrency ecosystem around blacklisting."

Chainanalysis has partnered with Paxful to create new compliance standards for P2P exchanges. Paxful will use Chainalysis KYT (Know Your Transaction) to monitor its platform's crypto transactions in real-time and Chainalysis Reactor to build investigations when it detects suspicious activity.

The Financial Action Task Force (FATF) looks to be going after decentralized finance (DeFi) applications in their recent draft guidance released. When it comes to DeFi platforms, the FATF said its standards may not apply to the underlying software or technology, but entities involved with the decentralized application (DApp) such as owners or operators may now be considered virtual asset service providers (VASPs). Virtual asset (VA) escrow services, including services involving smart contract technology, brokerage services, order-book exchange services, advanced trading services, and custody providers will all considered VASPs.

The European Banking Authority (EBA) published its biennial Opinion and accompanying report on the money laundering and terrorist financing (ML/TF) risks affecting the EU's financial sector. In terms of cross-sectoral risks, the opinion highlights risks around virtual currencies, fintech and crowdfunding platforms.

South Korea's Financial Services Commission (FSC) introduced penalties for crypto-asset exchanges that don't implement stringent anti-money laundering laws. Crypto exchanges and other companies that facilitate crypto transactions will face fines of between $26,000 to $52,000, or 30% and 60% of the maximum legal penalties. Companies will have to pay fines if they don't report suspicious transactions, keep data on said transactions and maintain a log of customer transactions. Smaller companies would have to pay smaller fines. https://www.fsc.go.kr/eng/pr010101/75536?srchCtgry=&curPage=&srchKey=&srchText=&srchBeginDt=&srchEndDt=

The Financial Action Task Force (FATF) published guidance for applying a risk-based approach to anti-money laundering (AML) and countering the financing of terrorism (CFT) supervision. The guidance is intended to support supervisors in the transition from rules-based supervision to risk-based supervision. Among other things, it provides high-level guidance on risk-based supervision, which explains how supervisors should assess the risks their supervised sectors face and prioritise their activities.

According to Michael Morell, a former CIA acting director, the broad generalizations about the use of bitcoin in illicit finance are significantly overstated. This flies in the face of the false narratives spun by senior government officials, such as Treasury Secretary Janet Yellen, who issue public warnings about bitcoin's alleged use by criminals. In a paper commissioned by the newly formed lobbying group Crypto Council for Innovation, Morrell concluded that there was probably less illicit activity in the bitcoin ecosystem than there is in the traditional banking system. Furthermore, he highlighted blockchain analysis as a highly effective crime fighting and intelligence gathering tool. https://cryptoforinnovation.org/resources/Analysis_of_Bitcoin_in_Illicit_Finance.pdf

"Virtual assets give culprits a false sense of security that their identities can hardly be ascertained. They are also falsely portrayed as an untraceable payment method which facilitates illegal activities by enabling criminals to carry out transactions without being tracked. However, once the public gains a better understanding of Blockchain technology, it will become clear that Bitcoin's public transaction ledger is in fact a gold mine of information for authorities."

"The IRS says over-the-counter chats on Telegram might be the preferred way for some criminals to move around dirty funds."

The Thai Anti-Money Laundering Office reportedly announced that, starting in September, local digital exchanges must verify their customers' identities through a "dip-chip" machine that requires clients to be physically present. Most large gold shops have been using ID card dip-chip machines for identity verification for 4-5 years because it is more convenient than photocopying. https://www.amlo.go.th/index.php/th/

The Central Bank of Iran is reportedly authorizing banks and licensed foreign exchange shops to use crypto-assets as payments for imports, to mitigate the impact of economic sanctions imposed by the United States. The crypto-assets must derive from mining operations officially licensed by the Iranian Ministry of Industry, Mine and Trade.

The Turkish government has added crypto-asset exchanges to the list of firms subject to the country's anti-money laundering and combating the funding of terrorism (AML-CFT) regulations. The regulatory change took immediate effect after the presidential decree-similar to an executive order in the US-was published in the Official Gazette today. https://www.resmigazete.gov.tr/eskiler/2021/05/20210501-5.pdf

Coinbase published its Transparency Report showing that it received 4,227 requests for customer data in 2020 from U.S. authorities and law enforcement agencies deom around the world, and that the pace of requests is increasing. The U.S. agencies ranged from the FBI and Drug Enforcement Agency to the country's tax collector, the IRS, and the Food and Drug Administration. https://blog.coinbase.com/coinbase-transparency-report-h2-2020-b8ef1632c4dc

A federal court in the Northern District of California authorized the Internal Revenue Service (IRS) to serve a John Doe summons on the crypto exchange Kraken, seeking information about U.S. taxpayers who have used crypto. The IRS is seeking information about taxpayers who conducted at least $20,000 in transactions in crypto between 2016 and 2020. The summons seeks information related to the IRS's "investigation of an ascertainable group or class of persons" that the agency said it has a reasonable basis to believe may have failed to comply with its laws. https://www.justice.gov/opa/pr/court-authorizes-service-john-doe-summons-seeking-identities-us-taxpayers-who-have-used-1

The Financial Action Task Force (FATF) updated its Guidance on the risk-based approach to virtual assets (VAs) and virtual asset service providers (VASPs). These changes aim to maintain a level playing field for VASPs, based on the financial services they provide in line with existing standards applicable to financial institutions and other AML/CFT-obliged entities, as well as minimizing the opportunity for regulatory arbitrage between sectors and countries.

This BIS paper assesses emerging financial integrity (e.g., anti-money laundering) regulatory approaches and supervisory practices and identifies policy priorities to address common challenges faced by financial authorities. It points to opportunities to adopt new approaches, like blockchain analytics, that take advantage of the inherently data-rich nature of the cryptoasset sector. Also, the inherently cross-border nature of crypto-assets, as well as the uneven global implementation of international standards in this area, make international cooperation a critical component for effective supervision.

"FATF makes it clear that it takes an expansive view on virtual asset and VASP definitions, and that most existing arrangements have some party involved that would qualify as a VASP, either at the development or launch stage of the project. Draft guidance specifies that DApps usually have a "central party" involved in creating and launching an asset, setting parameters, holding an administrative key or collecting fees, and such entities involved with the DApp may qualify as VASPs."

Iran is using Bitcoin mining to circumvent and lessen the effect of the economic sanctions that the U.S. and other countries have applied to the country since 2006, according to a new study by Elliptic. The country is indirectly using bitcoin mining to export part of its energy reserves, whose exports are being hampered by the said sanctions.

Over the last few weeks, the U.S. Financial Crimes Enforcement Network, or FinCEN, has been inundated with 7,477 angry comments about a rule change it proposed just before Christmas. They are upset not only about the reduced usability and less privacy with the new rule, but they also claim it creates a double standard between crypto transactions and legacy cash transactions that occur between financial institutions and individuals. But JP Koning disagrees, But I disagree with these claims about unfairness - crypto-assets are merely inheriting the same regulations that already apply to other forms of money transfer.

In response to a deluge of comments, the U.S. Financial Crimes Enforcement Network (FinCEN) is reopening the comment period for its recent proposed rulemaking regarding certain crypto-asset transactions. The proposed rule would impose new know-your-customer requirements on crypto-asset transfers to personal ("unhosted") wallets. Users would have to provide detailed personal information for transactions greater than $3,000, and exchanges would be required to report either individual or groups of transactions that add up to more than $10,000 during a day to FinCEN. The original comment period was only 15 days, most of which were holidays. Stakeholders now have an extra 45 days to comment on the first ("$3,000") rule proposal, and 15 days on the second ($10,000) one.