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Syracuse, D., Boehm, J., & Lundgren, N. (2022). Anti-money laundering regulation of privacy enabling cryptocurrencies. 
Added by: Jack (2023-01-08 15:28)   Last edited by: Jack (2023-01-08 16:44)
Resource type: Book
BibTeX citation key: Syracuse2022
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Categories: Monero-focused
Creators: Boehm, Lundgren, Syracuse
Views: 22/116
Attachments   perkins-coie-llp-white-paper-aml-regulation-of-privacy-enablin.pdf [6/37] URLs   https://urosario.e ... rivacy-enablin.pdf
Abstract
Privacy-enabling cryptocurrencies, commonly known as privacy coins, are enhanced versions of early cryptocurrencies
that were developed to protect the financial privacy of individuals and businesses alike. Each privacy coin leverages
innovative mechanisms that provide privacy, encryption, and security to its users. Alongside their positive effects,
however, these mechanisms have raised an important compliance question:

Is it possible for regulated entities to comply with anti-money laundering (“AML”) obligations when supporting
privacy coins?

The answer, in our view, is yes.
Not only do privacy coins provide public benefits that substantially outweigh their risks, existing AML
regulations properly and sufficiently cover those risks, providing a proven framework for combatting money
laundering and related crimes.

In reaching that conclusion, we profile several privacy coins, detail key AML regulations and intergovernmental
recommendations affecting privacy coins, and explain the measures that have allowed financial institutions,
intermediaries, and virtual asset service providers (collectively, “VASPs”) to comply with AML obligations
when facilitating privacy coin transactions. We also dispel the misconception that privacy coins are
fundamentally incompatible with AML compliance, focusing on measures that have allowed VASPs to comply
with AML obligations when conducting or facilitating privacy coin transactions.

This white paper proceeds in four parts, as follows:
In Part 1, we discuss the importance and benefits of financial privacy for individuals and businesses, as well
as how privacy coins address identified deficiencies.

In Part 2, we survey several different privacy coins and the mechanisms that each uses for privacy, encryption,
and security.

In Part 3, we survey the approaches taken in the United States (at the federal and state level), Japan, and
the United Kingdom with respect to AML regulation of privacy coins in addition to the recommendations set
forth by the Financial Action Task Force, an intergovernmental body.

Finally, in Part 4, we explore the effectiveness of targeted AML regulation on VASPs and how unique features
of certain privacy coins assist VASPs with compliance. We conclude that privacy coins protect legitimate
individual and commercial privacy interests and that existing financial regulations sufficiently address the AML
issues that privacy coins present.


  
Notes
Discusses the current AML regulation in detail for different jurisdictions.

The paper concludes:

Privacy coins reflect a nascent, but important, effort to safeguard our fundamental interest in personal and commercial
financial privacy. The AML risks of privacy coins, while real, do not require specific, tailored regulations that may pose
an unnecessary risk of stifling privacy coins’ growth. Rather, VASPs can adequately address those AML risks by
maintaining an effective, risk-based program. Allowing VASPs to support privacy tokens under current, tested AML
regulations strikes the appropriate policy balance between preventing money laundering and allowing beneficial,
privacy-preserving technology to develop.


  
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