Christy Goldsmith Romero, the commissioner of the Commodity Futures Trading Commission (CFTC) has proposed reducing the anonymity of cryptocurrencies as a means for managing the associated risks of digital assets. Romero pointed out that the risks associated with digital assets must be managed in order to protect market integrity, national security and financial stability. She believes that reducing anonymity with the use of identity verification solutions will help reduce the risks of illicit finance among cryptocurrency markets.
The commissioner stated that anonymity-enhancing technology used in digital assets like Bitcoin, Ethereum and most other public blockchains, increases the potential for substantial risk. She also mentioned that Blender and Tornado Cash, two mixers, were recently sanctioned by the United States Treasury Department, where Tornado Cash was allegedly involved in laundering $7 billion.
Romero argued that crypto companies can maintain financial privacy for their customers without relying on mixers and anonymity-enhancing technology. According to her, traditional finance (TradFi) ensures financial privacy by verifying the customer's identity through know-your-customer (KYC), anti-money laundering (AML) and countering the financing of terrorism (CFT) measures, while still allowing them to maintain segregation between their identity and their financial data.
Regarding identity verification, Romero encouraged exchanges as well as those offering decentralized finance (DeFi) services to verify the digital identity of users. She stated that there are existing technologies that can provide digital identity suitable for this purpose, and several new laws are being considered that could address anonymity and digital identity.
Overall, the CFTC's interest in reducing the risks associated with cryptocurrencies has been made clearly by the commissioner's speech. The U.S. government is looking to prioritize preventing illicit finance as well as increasing transparency in the digital asset markets. Technology and laws can help to ensure that users and service providers find the correct balance between anonymity and identity verification.
Melanie Lee
- 2023-04-25
CFTC Commissioner Calls for Reduced Anonymity of Cryptocurrency Transactions
Commissioner Christy Goldsmith Romero of the Commodity Futures Trading Commission (CFTC) has proposed reducing the anonymity of cryptocurrencies as a means for managing the associated risks of digital assets. The United States Treasury Department has already sanctioned Blender and Tornado Cash and Romero believes reducing anonymity with the use of identity verification solutions will help reduce the risks of illicit finance.
