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What are the 7 Key Takeaways from Facebook's Libra Hearings?

The debate on Facebook’s Libra continues with the hearing with the Senate Banking Committee (“Senate hearing”) on 16 July and the United States House Committee of Financial Services (“House hearing”) on 17 July. Here are the 7 key takeaways from the two hearings.

Libra is centralized

Regulators believed that the composition of the Libra Association has made Libra “highly centralized”. In the House hearing, New York Congresswoman Alexandria Ocasio-Cortez (AOC) questioned if the members of the Libra Association is democratically elected. David Marcus, the Head of Calibra said that the members are not elected but was governed by membership standards. When AOC realized the investment of $10 million as the criteria of founding members, she concluded Libra as “a currency controlled by an undemocratically-selected coalition of largely massive corporations.”

With regards to the eligibility of using Calibra and Libra, Marcus responded to Representative Sean Duffy’s question that anyone can use Calibra and Libra in jurisdictions where Facebook operates after they performed KYC procedures. However, when Marcus was asked by North Carolina Representative Alma Adams on whether any user can become a node on Libra blockchain, he denied and said that only large corporations with blockchain technology or finance backgrounds can become a member of the Libra association and a node on the Libra blockchain.

With the lack of decentralization, Representative Warren Davidson slammed Libra in the House hearing suggesting Libra falls in the same category as a run of the million sh*tcoins.

Can Facebook protect data privacy with its notorious track record?

In the Senate hearing, Ohio U.S. Sen. Sherrod Brown commenced with the poor history of Facebook in privacy protection, saying “Facebook has demonstrated scandal after scandal that it doesn’t deserve our trust.” Such skepticism continued in the House hearing, where committee chair Rep. Maxine Waters condemned Facebook with a “demonstrated pattern of failing to keep consumer data private on a scale similar to Equifax.” For example, Facebook purportedly influenced the 2016 U.S. Presidential elections by allowing malicious Russian state actors to purchase and target ads.

The discussion switched to data portability. Sen. Warner questioned if Facebook allows data portability in wallets.

“If a Facebook user wishes to use a wallet other than Calibra, will you make it easy to allow the export of other data?”

Marcus answered that Facebook will facilitate data export for wallets other than Calibra, and he hedged the same commitment for Whatsapp and Messenger. He added that the Calibra network will separate social and financial data and they will impose the highest privacy standard to earn people’s trust Sen. Warren expressed her concern on Facebook’s ability to monetize personal data among platforms. Senator McSally followed up on this and stressed that there are no grounds for committees to trust Facebook with “the track record of failing and violating and deceiving in the past”.

In the Senate hearing, Senator Robert Menendez asked if Facebook will inform users in 48 hours in cases of the data breach. Marcus replaced “48 hours” with “a reasonable length of time”.

Why Switzerland?

Both hearings questioned the registration venue for Libra Corporation. In the Senate hearing, committee chair Mike Crapo wondered why Libra Corporation is registered in Switzerland but not the U.S. Marcus replied that Libra Corporation will also register with U.S regulators in the future.

The committees are clearly not satisfied with what Marcus said in the Senate hearing. Representative Patrick McHenry raised similar concerns and Marcus explained that Switzerland is an “international place” to conduct businesses. He further addressed Representative Josh Gottheimer’s concern that the choice of Switzerland has nothing to do with evading U.S. regulations.

Several lawmakers also worried about the threat of Facebook’s Libra towards the dominance of USD. Marcus stated that the reserve is 50% backed by USD, with the Euro, the British Pound, and the Japanese Yen included as the collateral.

How about KYC and AML?

In the Senate hearing, Senator Cortez Mastro, former District Attorney of Nevada seek Marcus’s commitment to the compliance of AML and sanction laws. Marcus highlighted that they are working to comply with FinCEN regulation.

In the House hearing, Rep. David Scott explicitly expressed his concern on how Facebook Libra complies with KYC, AML and ensures the safety of the existing financial system. Marcus replied that they will launch AML guidelines to satisfy the needs of AML, KYC, and counter-terrorist financing. With regards to potential illegal activities on Libra blockchain, Marcus believed that this can be improved by system design and proper KYC controls to ensure on and off-ramps are properly regulated.

Can Facebook protect consumer’s funds on Libra?

Senator Tester questioned Libra’s ability to protect consumers against loss of funds or fraudulent purchases, along the line of credit cards or the FDIC.

While Marcus claimed they will try their best to resolve those issues as soon as possible, Tester stressed that proper solutions must be in place before Libra goes live.

Representative Carolyn Maloney asked Marcus if he would at least promise to conduct a pilot test before the full launch of Libra. She assumed the pilot test would involve less than 1 million users and overseen by the Federal Reserve and the Securities and Exchange Commission (SEC). Marcus did not provide a clear response and merely stated that they will work closely with regulators.

Is Libra public good?

AOC asked Marcus if Libra is a public good. Marcus claimed that “sovereign currency should remain sovereign” and said he is not in the position to decide whether Libra is a public good.

Praise for Bitcoin?

House minority leader Kevin McCarthy told CNBC that unlike Trump, he likes Bitcoin and the security of blockchain technology. He believed that lawmakers are skeptical about Facebook’s Libra because Libra is centralized, which can threaten the safety of the financial system. Lawmakers are not hostile towards cryptocurrency, he added.

Final words..

We believe there are some questions not properly answered in both the Senate and House hearings, such as the main reason for Facebook launching Libra. Going forward, the centralization of the Libra Association and the notorious history of privacy breach will be the main obstacles for Facebook Libra to go public.

FinCEN Director Warns Crypto Firms Are Not Above Anti-Money Laundering Laws

Speaking at the University of Georgetown, Kenneth Blanco, FinCEN (The United States Financial Crimes Enforcement Network) Director, blasted crypto firms by warning them that they are not exempted from the anti-money laundering laws. This was first reported by AmericanBanker on 21 October 2019.

According to the news, Blanco is adamant that fintech firms that offer currency users anonymity are subject to the same regulations as traditional firms. He stressed that they must comply with AML laws stating, “The expectation is that you will comply with existing regulations.”

Kenneth’s comments appeared to be pointing towards crypto firms that offer anonymous payment services that could hide intended criminal activities. In this case, he commented that the reason user identity is necessary is to ensure transactions are free of illicit activities.

“Whether it’s opioids … or human smuggling on the other side … you want to know who that person is.” said Blanco. He further stressed, “So when you tell me you don’t know who’s on the other side, you’ve got a big problem. Because you are required to know, and that is what our expectation is going to be.”

He concluded by stating that the transparency required by FinCen should not be such an issue, stating, “All we’re asking for is a name, address, account number, transaction, recipient, and amount.”

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A New Era of Smart Banking: Virtual Bank by Standard Chartered Building Digitally-Born Services

Hong Kong’s currency board and de facto central bank, Hong Kong Monetary Authority (HKMA), introduced the virtual banking license in 2017 for a “new era of smart banking.” Since then, there have been eight licenses granted, one of which includes SC Digital Solutions Limited, the Virtual Bank by Standard Chartered (official name to be revealed), a joint venture between Standard Chartered Bank, PCCW, HKT, and Ctrip. HKT and parent PCCW are one of the dominant telecommunication companies in the region. Ctrip is a Chinese online travel agency that is under the same parent company as Trip.com.

During Hong Kong Fintech Week 2019, Blockchain.News spoke with Deniz Güven, the CEO of the Virtual Bank by Standard Chartered, to understand the current developments and the new technology behind it. The Virtual Bank by Standard Chartered was one of the first granted a virtual banking license on March 27, 2019, from the HKMA along with two other licensees, Livi VB Limited and ZhongAn Virtual Finance Limited.

The Journey from Traditional Banking to Virtual Banking

The Virtual Bank by Standard Chartered started around 18 months ago, with preliminary research in ethnographic research to understand the market. Ethnographic research helped with understanding the needs of the market and the consumers’ behavior. Güven said: “If we can understand the real behavior behind it, we can build new services.”

Güven told Blockchain.News that the Virtual Bank by Standard Chartered has reached out to over 2000 people in Hong Kong from different classes and demographics to understand the needs of the market. “We identified different pain points in Hong Kong. There are a lot of good banks in Hong Kong, and Hong Kong’s banking systems are one of the best in the world. From a product perspective, there is a huge maturity.”

He elaborated that the Hong Kong market is very advanced in terms of banking products, but not in terms of services and digital platforms. According to Güven, the most significant problem is that there are relatively fewer mobile users in Hong Kong, which is around 40% compared to the users in Europe and the US, which is approximately 70% to 75%. Güven suggested that the service usage is quite limited in Hong Kong, and the market has been premature.

Blockchain for Virtual Banks?

In terms of whether blockchain will be implemented in the virtual bank, Güven said: “We have some plans, but not for day one. I see blockchain as a digital currency, but it can be more than just a currency. It’s a behavior.”

He believes that instead of going ahead and building blockchain systems first, he explained: “We need to understand real customer needs and put the mental model there, with the right currencies and blockchain as a platform as a technology. If we can identify the right needs, blockchain will be a great use case for us.”

Smart Banking for the ‘Generation Moth’

Güven explained that classifying behavior is not age-specific. This age-agnostic approach allows the bank to classify people not by their income or age, but by their behavior.

“People have been asking me, is it going to be millennials? I don’t believe that it’s a millennial explanation. I believe it’s people who are attracted to the light of their mobile phones – the generation moth,” commented Güven. “Generation moth” refers to the era of people who are always on their mobile phones, who have access to the internet and belong to the digital world, and these are the people the virtual bank is targeting.

Building Digital Services from Scratch

Güven mentioned that the success of mobile and digital banking services relies on building digital services from scratch. “Our starting point was to solve the pain points with the right services and right products, especially with digital-born services.”

Currently, the Virtual Bank by Standard Chartered is looking to focus mainly on individual retail banking customers in Hong Kong. “We want to define what is an individual customer and how we do the individual segmentation model. We’re trying to create some behavior classes to understand their needs and behaviors.”

On differentiating the Virtual Bank by Standard Chartered with the other eight licensed virtual banks in Hong Kong, Güven said: “Our aim is to create an end-to-end customer experience.”

Secondly, Güven explained that although many people have bank accounts in Hong Kong, they may not be getting the right or the best services from these banks. He refers to these people as the “underserved.” He explained that the main goal of the virtual bank is to “democratize the old banking services” and provide a “difference in service levels.”

Güven explained the 10 pillars of new operating model for virtual banks during the HK FinTech Week.

PCCW, HKT and Ctrip: The Key Differentiator

One of the members of the Virtual Bank by Standard Chartered is the HKT and parent PCCW Group. Güven elaborated: “They are so important for us because out of the 7.5 million people of Hong Kong’s population, they have more than 4 million customers from a distribution perspective.”

“Ctrip, they have more than 200 million users globally, and they are very good in the travel industry. We see this as we are building services and distribution channels together.” He further mentioned that the average person from Hong Kong travels abroad 4.1 times every year, which emphasizes the value of its partnership with Ctrip. “It’s not only about giving mileage programs, but it’s also giving more than that – it’s giving them the experience. These three things will be so important as a differentiating factor.”

“Clean and Lean” for AML/KYC

“AML [anti-money-laundering], KYC [know-your-customer], security and fraud are our first priorities, we are not compromising any of these, but this doesn’t mean that we cannot create new experiences for our customers,” explained Güven.

AML on the onboarding side can be processed in a few minutes, while machine learning can help to make this process more automated in a clean and lean manner. Güven stated that the main purpose of using new technology is to make the services “leaner.”

2020: The Year to Look Out For

Güven said that the virtual bank would be open early next year, in 2020. “Once we open, you will see new and interesting services and products from us. The experience will be totally different, and we will share all these things in the near future.”

Güven concluded that with the eight licensed virtual banks in Hong Kong, a lot of value would be created for the citizens in Hong Kong.

Credits to Edwin Hui for his support to the interview

Mastercard CEO Answers: The Reasons Behind Leaving Facebook’s Libra Association

Mastercard’s CEO, Ajay Banga, stated the reasons behind the company leaving Facebook’s Libra Association in an interview with the Financial Times. Having left the Libra Association in October last year alongside Visa and other firms, the Libra Association has seen eight firms quitting the project.

Banga said,“When you don’t understand how money gets made, it gets made in ways you don’t like.” He added that the social media giant’s data integrity was also another reason behind quitting the project.

The CEO does not understand the stablecoin project’s business model. At the same time, the need for a proprietary digital wallet made it clear that the project may not have positioned itself as a financial inclusion tool, as it was initially stated to be.

Banga also had concerns about the Libra Association’s members to adhere to compliance measures, including anti-money laundering and know-your-customer regulations.

Mastercard beat Wall Street’s estimates in quarterly profit during an economic slump in October last year. Despite abandoning development efforts with Libra, Sachin Mehra, the Chief Financial Officer of Mastercard, said that the company would instead develop initiatives on its own. He added, “We’re very engaged on the blockchain technology. Much like a lot of other companies, we believe the technology has the capability to solve a lot of pain points. It still needs to be proven at scale depending on the use case and question.”

With over 100 blockchain patents filed globally, Mastercard has ranked in the top 3 among top blockchain innovators. Mastercard’s Provenance Solution is industry-agnostic and allows brands to provide record product journeys to contribute to consumer confidence, trust, and awareness. The Provenance Solution also provides governance capabilities for supply chain networks.

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French-Austrian Collaboration on Blockchain Forensics Instrument to Enhance Cryptocurrency AML

The Austrian Institute of Technology (AIT) and the French cybersecurity firm Nigma Conseil have partnered to develop a new blockchain forensics tool. The two companies have signed a deal to strengthen their collaboration to work on e-Nigma, a proposed compliance tool designed to fight against crypto and financial crime. AIT is the largest research and tech company in Austria owned by the government.

New Blockchain Detective

Nigma Conseil and the AIT have teamed up to make their cooperation stronger against financial crimes associated with cryptocurrencies. The two firms have been working for many months to enhance the e-Nigma platform’s anti-money-laundering (AML) capacities and blockchain analytics built on AIT’s open-source crypto forensics platform, GraphSense.

E-Nigma is a comprehensive blockchain forensics instrument that enables users to carry out due diligence in response to anti-money laundering (AML) and know your customer (KYC) regulation. The tool monitors and tracks blockchain transactions of companies dealing with crypto and their derivatives. The instrument is also useful in governmental agencies and banks.

The platform provides many advanced features like wallet clustering and risk scoring. It can identify addresses with real-life identities by scaping through both the dark and clear web.

The technology was built as part of an AIT-led program recognized as TITANIUM that was established to investigate transactions in “underground markets.” The European Union awarded the program $5.4 million to fight cryptocurrency crime.

Fabien Tabarly, Nigma Conseil CEO, said: “The collaboration between AIT and Nigma Conseil has been significant in implementing the most innovative instruments to mitigate financial crime in digital assets.”

Digital Blockchain Forensics

Tracing and tracking payment-flows in crypto assets by analyzing transactions in the underlying blockchain has become a competitive business. E-Nigma is engaging in a competitive field, with similar transaction mapping tools being provided by CipherTrace, Elliptic, and Chainalysis. Such blockchain forensics firms monitor customer withdrawals and deposits for signs of “tainted” coins, which have been involved in drug dealing, terrorism, or money laundering activities.

For example, CipherTrace assists governments and businesses in making cryptocurrencies trusted and safe. Elliptic, which is recognized as the oldest forensics company, is tasked with identifying illicit activities in cryptocurrencies and providing actionable intelligence to government agencies, financial institutions, and crypto companies. Chainalysis, which is best known for all blockchain forensics companies, generates a wealth of interesting data on hodling patterns, lost coins, and many more.

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Mashreq Bank and DIFC Launch First KYC Blockchain Platform in UAE

Dubai International Financial Centre (DIFC) and Mashreq Bank announced the launch of the region’s first blockchain data-sharing platform which went live on March 1.

The initiative, known as Know Your Customer (KYC), supports licensed businesses and corporations when opening digital bank accounts by leveraging blockchain to allow instant identity verification.

According to the publication, the new platform was unveiled as a market-first of its kind in the Middle East and utilizes the blockchain of DIFC-incubated fintech firm Norbloc. Deloitte also supported Mashreq in establishing governance and in managing the program implementation.

The instant identity verification is facilitated by removing the existing paper-based KYC procedure and replacing it with a blockchain-centric digital one. DIFC prepares the KYC record during the corporate license application and is shared electronically via blockchain with Mashreq, with customer consent, simplifying the process of opening a bank account. The KYC solution is designed to stimulate the corporate ecosystem and is available to all qualified financial institutions/licensing authorities and supports connectivity with other similar initiatives.

Ahmed Abldelaal, CEO, Mashreq Bank said, “The program aligns with the UAE Blockchain Strategy 2021, earmarking the beginning of a journey towards a broader vision of forming a Consortium of Banks, Government Bodies as well as other Licensing Authorities, for seamless sharing of customer KYC data, thus leading to increased transparency, added security and a better customer experience.”

DIFC’s data protection laws are in line with international best practice standards and is consistent with EU regulations and OECD guidelines. The legal framework is designed to balance the needs of businesses and organizations to process personal information while upholding an individual’s right to privacy.

Progress in UAE Blockchain Strategy

The UAE has been making steady progress in the implementation of blockchain technologies, in line with the UAE Blockchain Strategy 2021.

Recently, the UAE Ministry of Health and Prevention (MoHAP), the Ministry of Presidential Affairs, Dubai Healthcare City, and other authorities came together to launch a blockchain-based system for health data storage.

As reported by Blockchain.News, the blockchain-based platform has been created to improve the efficiencies of smart healthcare services and to streamline the search of health facilities as well as to be able to look for its licensed and technical personnel.

An Emirates News Agency reported by raising the efficiency of MoHAP and health authorities’ smart health services; it is in line with the outcomes with the annual meetings of the UAE government. The blockchain-based platform is also part of MoHAP’s plans to incorporate artificial intelligence “by 100% into the health services, pursuant to the UAE Artificial Intelligence Strategy.”

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KYC on Exchanges Powerless Against PlusToken Ponzi Scammers According to New Report

The PlusToken Ponzi scheme operators are using regulated KYC compliant exchanges to dump their cryptocurrency according to an updated report by investigative firm OXT Research.

In their first report on the PlusToken Ponzi scam, OXT Research introduced estimates for the size of the popular high yield investment scam and the depth of the market impact attributed to the accumulation and distribution of the PlusToken Bitcoin hoard – which is estimated to be an incredible 200,000 BTC.

PlusToken has been blamed for causing Bitcoin prices to fall in 2019 and as recently as March 6 when it was reported that the fraudsters had unloaded 13,000 BTC which sent the Bitcoin price plummeting by over $500.

The second edition report released on March 10, revealed the method used by PlusToken scammers to move their funds through regulated exchanges despite the strictly enforced Know Your Customer (KYC) compliance standards.

KYC Irrelevant

The report explained that the PlusToken scammers have moved their funds from the direct pile of unmixed allotments and locations to mixers like Wasabi wallet which implements a trustless coin shuffler, and then the funds would be consolidated and distributed.

While the first edition by OXT demonstrated that Huobi had been leveraged by the scammers for distribution the new edition found that while the global exchange was still the main source of distribution, a large amount of the coins have ended up on the OKEx exchange. Per the report, “OKEx is a newly labeled and significant coin destination having received nearly 50% of February distributions.”

Both Huobi and the South Korean exchange OKEx are KYC compliant in line with the global push for increased transparency and regulation in cryptocurrency exchanges.

OXT stated the most of PlusToken’s major market effects should have passed as their data reveals that about 70% of their BTC stockpile has already been distributed.

BTC Price and Safe Haven Status

As reported by Blockchain.News, Bitcoin’s status as a safe-haven asset has been under intense scrutiny as the BTC price continues to fall amidst a series of crisis events in 2020 which have continued to create the ideal environment for the digital commodity to theoretically thrive. Beginning with the Iranian – US conflict in early Jan, the coronavirus outbreak triggering a cut in interest rates by the Federal Reserve, and now the plummeting oil price following a disagreement in Vienna between Russia and the OPEC nations.

The data in the OXT reports, highlighted that the Ponzi scheme has sold around $1.3 billion worth of BTC in the past seven months noting the distribution increases into market strength and slowing with market price weakness. The continual dumps by PlusToken scammers each time the BTC price has risen has added drastically to the cryptocurrency’s volatility.

The market manipulation is frustrating as it is now an added variable for analysts to integrate into their inchoate analysis of the nascent asset and could be a huge factor into why Bitcoin has not met the expectations of its safe-haven status.

Source: https://insidebitcoins.com/cryptocurrency-exchanges

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Mr Dark's Depraved Rape and Child Porn Site Brought Down by Blockchain Analysis

A Dutch national has been indicted by a federal grand jury in the District of Columbia for operating a depraved and violent pornography site featuring minors and sexual assault. Michael Rahim Mohammed, known as Mr Dark, allegedly profited around $1.6 million which was paid in cryptocurrencies like Bitcoin and Ethereum.

The ‘Dark Scandals’ website hosted thousands of videos and images that were promoted as being “real” acts of sexual violence including blackmail and rape. The site operated on both the darknet and the clearnet since 2012.

Cryptocurrency Payments

According to the announcement by U.S Immigration and Customs Enforcement (ICE), the illegal content was distributed to clients via downloadable email packs. Users could either pay with Bitcoin or Ethereum, or they could add their own content to the site’s library.

Mohammed was the administrator of the site and received 188 Bitcoin and 27 Ether among the 1650 deposits made to Dark Scandals. He also set very specific rules prohibiting “fake” or simulated violence insisting that the content be “real rape” and preferably homemade.

“The obscene material distributed by Michael Rahim Mohammed victimizes innocent and vulnerable people in our communities,” said Alysa Erichs, acting executive associate director of U.S. Immigration and Customs Enforcement’s Homeland Security Investigations. “We will continue to work with our law enforcement partners to investigate and prosecute these crimes, using all available resources to ensure that additional vulnerable victims aren’t exploited.”

Cryptocurrency was the sites main source of financial support, however,the blockchain’s supporting the transactions recorded all the payment details of the crime which allowed law enforcement agencies to track them.

303 Bitcoin and Ethereum accounts that paid cryptocurrency to the site using Chainalysis transaction tracing software were tracked by a combination of agencies. A forfeiture complaint seeks to recover the funds and offer them to the victims.

Blockchain Analysis

The forfeiture complaint notes that many of the cryptocurrency accounts tracked had incomplete KYC verification and had only been used for one transaction.

A thorough blockchain analysis of the accounts revealed further illicit transactions. From the complaint, “Law enforcement observed numerous payments from these accounts to other darknet markets, which were flagged by blockchain analytics companies, enabling law enforcement to identify illicit transactions.”

Michael Rahim Mohammed has been officially charged with the crimes of distribution and production of child pornography, engaging in the selling and transferring of obscene material, and laundering of monetary instruments.

Trustless Not Anonymous

When the Financial Action Task Force (FATF), issued new guidelines on how digital assets should be regulated last June, there was a lot of pushback from the crypto community and exchanges regarding the need for know you customer (KYC) compliance with many highlighting that cryptocurrency privacy was over.In an interview with Blockchain.News, Matthew Unger, CEO of IComply investor services addressed the concerns on privacy saying,”While we want to be free, money has a direct impact on people’s lives. The reality is that crypto is often used in the child sex trade, to launder massive amounts of money, and to undermine the free democratic process in favor of corruption and foreign influence, such as was the case in the 2016 U.S. election (re: the Mueller report). We’ve seen even more extreme values on privacy in the last few years. While some people say privacy is more important, these people limit the current and potential uses of crypto in the financial system.”

According to Unger, many are missing the point of cryptocurrency as he says, “The original objective of this technology is not to be anonymous—it’s to be trustless. You don’t need to know anything about an individual to know that you can trade with them and that their money is real. What the tech can’t do is tell you if the crypto is stolen, was used to harm someone, or was used to facilitate acts of terrorism, crime, or other illicit or harmful activities. In order to use crypto in good conscience, it’s prudent that users deal with people that they have vetted.”

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South Korea’s Leading Crypto Exchanges Aid Police in Hunting "Nth Rooms" Blackmail Porn Members

The four primary crypto exchanges in South Korea, namely Coinone, Korbit, Bithumb, and Upbit, have reportedly offered to help police investigate the sexual exploitation of underage girls in the “Nth Rooms” scandal that has sparked a national outcry.

Crypto exchanges table vital information

The sexual exploitation of underage school-going girls in South Korea has been happening for years in the “Nth Rooms” incident. Notably, they would be filmed undertaking violent self-harm and sexual acts, and the videos taken were made available via Telegram chat rooms after members made crypto payments.

It is reported that at least 10,000 people utilized these chatrooms after paying fees ranging from $200 to $1,200.

Following thorough investigations by the South Korean police, dozens of victims have been established as the videos usually presented the girls’ addresses and names. Currently, the police have identified 74 people, including 16 underage girls who were exploited.

Crypto exchanges seek to reveal crucial information about this scandal that has left people across the globe mouth agape because of the inhumanity rendered to underage girls. It is alleged that among the 10,000 members in the “Nth Rooms” were famous startup company CEOs, sports stars, popular artists, and professors.

The ringleader of the blackmails and chat rooms was revealed as 24-year-old Cho Ju-bin after at least 5 million South Koreans signed petitions to have him named.

Crypto exchanges heed the call

Following requests by the South Korean police for assistance, the four leading crypto exchanges in this nation seek to comply with this appeal by offering crucial information that will be instrumental in unraveling the culprits in the “Nth Rooms” scandal.

Earlier this month, the country’s national assembly amended the Act on Reporting and Use of Specific Financial Information, and this officiated the legalization of cryptocurrency trading and holding.

Once implemented, this law will be instrumental in averting crimes, such as the “Nth Rooms” scandal and money laundering given that crypto businesses, such as exchanges, wallet companies, and trusts, will be required to have a real-name verification partnership with an approved local bank. As a result, a verified person will be assigned a single bank account where he/she can deposit and withdraw fiat currency to and from an exchange.

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Estonia Revokes 500 Crypto Business Licenses in a Move Against Illegal Money Laundering Activities

According to a Bloomberg report, Estonia has revoked licenses from 500 crypto companies. This is an estimate of 30% of the entire number of approved crypto companies in the country. Regulatory authorities embarked on such a massive action as part of combating illicit financial transactions after Danske Bank was associated with a $220 billion money-laundering scandal.

The regulator has crypto in its sights

Madis Reimand, the Head of the Estonian Financial Intelligence Unit (FIU), said that the crackdown was a pre-emptive strike meant to clean up the crypto industry. The FIU is responsible for the issuance of licenses. Reimand mentioned that the idea is not to ban the crypto sector at all, but rather to tighten regulations so that to prevent risks connected with money laundering.

The regulator has shut down firms that failed to begin operations in the country within six months of obtaining a license.

Reimand stated: “This is a first step in tidying up the market, allowing us to take care of the most urgent issues by permitting operations only for companies that can be subjected to Estonian supervision and coercive measures.”

The massive crackdown comes after Danske Bank, Denmark’s largest lender, was facing allegations of being involved in a money-laundering scandal. The bank was accused of facilitating $223 billion of laundered money through its branch in Estonia. The scandal exposed core flaws in the authorities, thus forcing them to turn attention to cryptocurrency companies, a sector regarded as high risk.

Until now Estonia has been a haven for cryptocurrency firms. The nation is among the first countries in Europe to liberalize cryptocurrency in 2017, licensing over 1,400 companies within three years.

But regulatory authorities have become stricter to curtail international risks associated with money laundering. Recently the Estonian parliament passed a law, which makes it difficult to get a crypto license.

The new regulations state that permits will now be given after three months at a cost of €3,00 ($3,715). In the past, it took 30 days to get the same license for €300. Crypto firms registered in Estonia will also have to register their entities operating outside the country. Reimand warned that more than 50% of the remaining crypto firms may lose their license because they have no operations in Estonia and their managers are outside of the country.

FinCen Director warns crypto firms are not above anti-money laundering laws

Last year, FinCen (The United States Financial Crime Enforcement Network) director, Kenneth Blanco, blasted crypto companies by warning crypto-related businesses that they are not exempted from the AML (anti-money laundering laws). He emphasized that fintech companies that provide currency users anonymity are subject to the same regulations as traditional companies. His comments seemed to target crypto companies that provide anonymous payment services that could hide intended criminal activities.

Thanks to blockchain innovation. In recent years, cryptos have exploded in popularity. Startups have raised millions of dollars to issue digital currencies in exchange of money. Anyone with a digital wallet and an internet connection can be a part of a coin sale business startup. That leaves plenty of opportunities for people to commit financial terrorism activities or launder money, especially in nations where corruption is rampant.