CFTC commissioner claims that digital asset risks must be eliminated to ensure national security and market integrity.
Christy Goldsmith Romero, the Commodity Futures Trading Commission (CFTC) commissioner, has suggested that the anonymity of cryptocurrencies should be reduced to manage their risks.
Romero voiced her concerns during the keynote speech at City Week 2023 in London on April 25th, which focused on Illicit Finance and Other Key Risks of Digital Finance.
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Christy Goldsmith Romero emphasized that governments and the industry must address the feature that makes cryptocurrencies attractive for illicit finance: anonymity. The commissioner argued that the risks associated with digital assets need to be managed to ensure market integrity, national security, and financial stability.
According to the CFTC commissioner, mitigating illicit finance risks in the crypto market involves confronting the issue of identity verification. While public blockchains provide a level of transparency and traceability, the use of mixers and anonymity-enhancing technology raises the potential for significant risks.
Regarding the matter, Christy Goldsmith Romero noted:
It is possible for all crypto companies to distance themselves from mixers and anonymity-enhanced technology, while still appropriately providing financial privacy for customers.
Romero also highlighted the recent sanctions imposed by the United States Treasury Department on crypto mixers Blender and Tornado Cash. Tornado Cash was allegedly involved in laundering $7 billion, including millions of dollars stolen by the North Korean Lazarus Group.
Romero believes crypto companies can maintain customer financial privacy without relying on mixers and anonymity-enhancing technology.
She clarified that there's a difference between financial privacy and anonymity. Romero noted that traditional finance ensures financial privacy through know-your-customer (KYC), anti-money laundering (AML), and countering the financing of terrorism (CFT) measures without using anonymity-enhancing technology.
Reducing cryptocurrency anonymity may be a necessary step toward managing the risks associated with digital assets while preserving financial privacy for customers.
