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Crypto assets are subject to increasing regulatory scrutiny
Switzerland’s financial regulator, the Financial Market Supervisory Authority (FINMA), has expressed concerns about the risks of cryptocurrencies being used for money laundering. The regulator mentioned this in its 2024 Risk Monitor report, noting that cryptocurrencies, particularly stablecoins, are increasingly being adopted for illicit activities.
According to the regulator, Switzerland’s status as a major wealth management hub for private clients makes it particularly vulnerable to money laundering risks, which were particularly high in the year under review. While identifying certain risks, such as failure to comply with due diligence and reporting obligations for cross-border wealth management, FINMA identified cryptocurrencies as major risk factors.
He said:
“The risks in the crypto space are becoming increasingly apparent. Cryptocurrencies are often used as a means of payment in cyberattacks or for illicit trade on the dark web.”
The regulator also noted that stablecoins are widely used to evade sanctions and that financial intermediaries offering crypto-related services are most at risk. Therefore, it urged such financial institutions to adequately manage money laundering risks that could harm the country’s reputation.
Crypto assets are subject to increasing regulatory scrutiny
While the report focuses on various money laundering risks in general, the mention of crypto and stablecoins is no coincidence. The regulator issued new guidelines on stablecoin risks earlier in the year, requiring issuers to verify the identities of token holders and beneficial owners.
The focus on crypto companies is not unique to Switzerland. Regulators in other countries have also flagged cryptocurrencies and stablecoins as vulnerable to money laundering. In Nigeria, authorities have alleged that crypto exchanges, particularly Binance, facilitate money laundering. The UK Financial Conduct Authority has also identified virtual asset companies as vulnerable to money laundering violations.
There have also been reports that stablecoin issuer Tether is being investigated by the US Department of Justice (DOJ) for violating anti-money laundering regulations through its USDT stablecoin. However, the company has denied this, with CEO Paolo Ardoino stating that it is an active collaborator with law enforcement agencies globally and would be aware if it were to be investigated by the US Department of Justice.
So far, global authorities appear to be making concerted efforts to regulate the use of stablecoins. In Europe, the Market in Crypto Assets (MiCA) law provides specific regulations for stablecoins, and with the rules set to come into effect by the end of the year, many exchanges are now scrambling to comply.
