Amber Group calls for crypto project transparency & accountability

The Turkish Lira (TRY) has become the third largest fiat currency by volume in the cryptocurrency market, according to a report by Kaiko. This milestone was reached as TRY's share of the crypto market hit an all-time high of 19% in early June. The increase in volume is attributed to the country's economic challenges, notably its high inflation rate, which has surpassed 70%, making the lira one of the most volatile fiat currencies globally.Photo by Afdhallul Ziqri on UnsplashFactors influencing the increaseThe shift in the Turkish lira's position in the crypto market is partly due to increased foreign exchange volatility and currency devaluation, common catalysts for cryptocurrency adoption in developing economies. Additionally, geopolitical factors such as a record number of elections and diverging monetary policies have intensified market fluctuations. This environment has favored cryptocurrencies like Bitcoin, which reached new highs against the lira in recent months. For instance, Bitcoin escalated to 2.3 million TRY in March from 979,000 TRY in October 2023. The recent adjustments in cryptocurrency trading platforms, particularly Binance's delisting of certain fiat trading pairs due to banking issues, have also increased the dominance of TRY in crypto transactions. This series of events underscores the growing interconnection between traditional and digital finance markets, highlighting the increasing role of cryptocurrencies in regions facing economic instability. 

Japan Set to Tighten Crypto AML RulesJapan is working on tightening anti-money laundering (AML) rules relative to digital assets shortly. That’s according to a report by local media outlet Kyodo News.The stricter enforcement measures will take effect from June 1. The objective is to include the tracing of cryptocurrency asset transactions into the legal framework relative to AML, and in that way, bringing the application of AML in Japan into line with global standards.Photo by Louie Nicolo Nimor on UnsplashTravel ruleIn December of last year, the Financial Action Task Force (FATF), a global money laundering and terrorist financing watchdog based in Paris, France, deemed that the approach taken to crypto-related AML in Japan fell short of international requirements and best practice.Specifically, it’s the FATF’s “travel rule” that the Japanese are about to implement. Otherwise known as FATF Recommendation 16, the travel rule is a set of guidelines devised to prevent both terrorist financing and money laundering.The measure puts an onus on all crypto companies to screen all crypto transactions that exceed the value of $1,000 or a variance of this amount based on implementation by each FATF member state. As an example, in the United States, the FATF travel rule is being implemented with transaction monitoring being applied on transactions to the value of $3,000 and above.Once identified, the crypto firm must record details of the transaction and communicate that information, including both sender and recipient data, to the authorities. That would involve the sender and receiver’s legal names, their account numbers, and addresses. Relevant transaction activity includes exchanges between one or more forms of digital currency and the transfer of virtual assets.G7 alignmentThe move follows a decision taken at a Japanese cabinet meeting on Tuesday, as a direct response to FATFs recommendations. Following discussions earlier this month, the intergovernmental political forum of the G7 group of countries indicated its support for the FATF’s call for the establishment of the travel rule as a global standard. Japan is currently leading the group through its G7 presidency and likely wants to align with the views of its international peers.The country had been moving towards travel rule implementation in the past but in a less decisive way. Two years ago, Japan’s Financial Services Agency (FSA) requested virtual asset service providers (VASPs) to implement the travel rule. In a self-regulatory approach in 2022, the country’s Virtual Currency Exchange Association issued a recommendation for members to apply the rule.Those approaches lacked teeth, leading to a cabinet decision to amend existing legislation late last year and this more recent move to apply and enforce the rule.Regulatory frameworkWhile Japan may not be top of the class in terms of AML regulation relative to crypto, it is a forerunner in terms of crypto regulation generally. It was the first country in the world to suffer a serious crypto-related failure when the Mt.Gox cryptocurrency exchange collapsed in 2014.The fall-out from that collapse led to the Japanese introducing more stringent regulations although it took until 2017 to get them implemented. As a consequence, when the next major collapse occurred, the fall of FTX in November 2022, the Japanese have fared much better than investors located elsewhere. Regulation meant that a separate Japanese entity, FTX Japan, was established. It had to adhere to stricter conditions, meaning that FTX Japan customers have been allowed to withdraw their funds since February while their international counterparts must undergo a much longer process to recover their funds.

Pakistan Implements Ban on CryptocurrencyPakistan has moved to ban cryptocurrency once more, with the country’s Minister of State for Finance and Revenue, Aisha Ghaus Pasha disclosing the move last week.According to multiple local media reports within Pakistan, on May 16 Ghaus Pasha stated at a session of the Senate Standing Committee on Finance and Revenue, that cryptocurrencies are banned and “will never be legalized in Pakistan.”Photo by Hamid Roshaan on UnsplashFATF Grey ListGhaus Pasha supported this position by outlining that the Financial Action Task Force (FATF) had set the banning of crypto as a condition for Pakistan’s removal from its “Grey List.”FATF is an initiative of the G7 group of countries, first established in 1989. Its mandate is to develop policies geared towards combating money laundering, and most especially, terrorist financing. The FATF grey list includes those jurisdictions who are deemed to require increased monitoring relative to their efforts to keep money laundering and terrorist financing to an absolute minimum.Pakistan had found itself on the FATF grey list over the course of a number of years. That meant reputational damage on an international basis, together with loss of investor confidence. It also signals the likelihood of weaknesses in a country’s financial system and in its financial controls. The categorization would have had an impact on the country’s ability to access international finance, impacted trade relations, and involved increased compliance costs.Against that background, there may be a certain logic to the Finance Minister’s stance, despite it naturally being distasteful to those of us that support the development of decentralized systems, blockchain, and cryptocurrency. After an extended period on that Grey List, Pakistan was only removed from it in October of last year.Currency devaluationNotwithstanding that, governments in the developing world may have added incentives in banning cryptocurrencies. Their currencies are oftentimes unstable, and the Pakistani rupee is no exception. Cryptocurrencies like bitcoin find their greatest use case in countries that have their currencies devalued or economies that fall into the trap of hyperinflation relative to the sovereign currency.In Pakistan’s case, the rupee plummeted to a record low against the US dollar in January. Naturally, that hurts ordinary citizens and provides the conditions under which people are more likely to investigate decentralized cryptocurrencies. On that basis, we shouldn’t be surprised to learn that the Pakistani government’s decision to ban crypto was publicly supported by Sohail Jawad, Director of the State Bank of Pakistan (SBP).Pakistani banks are naturally following the government and the central bank’s lead, in implementing the ban. One circular obtained by CoinDesk stated: “As per regulatory instructions from the State Bank of Pakistan (SBP), any remittance of foreign exchange directly/indirectly outside Pakistan to overseas foreign exchange trading, margin trading, and CFD trading apps/websites/platforms through any payment channel is not allowed/permitted by SBP and such payments are inherently risky and illegal.”Community reactionNaturally enough, the crypto community internationally and locally, is not enamored by the move. However, people who have been in the space over the last few years are accustomed to ever-changing stances taken by governments as a reaction to a technology that they simply don’t know how to deal with.Waqar Zaka, a Pakistani who works within the Web3 space commented previously on a ban that was implemented in Pakistan in 2017, only later to be found to be unconstitutional. Another Pakistani community member took to Twitter in taking a stand against the decision. Others still immediately considered how they could circumvent the ban.Crypto has always benefited from jurisdictional arbitrage, and while bans are not in any way helpful, in the longer run, they will never stop the roll out and further development of this innovation.