Another unfortunate series of events could have a silver lining for the industry as Australian federal forces shut down two crypto exchanges. Following the arrest of Australian millionaire Sam Karagiozis, AUSTRAC has suspended operations at AUSCOIN ATM and MK Buy & Sell, which trades as SK BTC.
According to New.com.au, Karagiozis was arrested by Australian Federal Police (AFP) officers on March 7 for alleged ties to a major crime syndicate. Among the list of charges, the crypto entrepreneur is accused of drug trafficking and using the dark web to handle the financial side of the operation. In conjunction with the AFP, AUSTRAC carried out raids on properties in Victoria, including the offices of the aforementioned exchanges.
Improved Standards Foil Suspected Criminal Activity
In a statement supplied to the media, the financial agency said the suspension of both exchanges was part of the investigation and necessary to prevent any further criminal activity.
“AUSTRAC’s role is to deter and disrupt criminal exploitation of Australia’s financial system, and we take swift action where we there is a reasonable risk of compromise. Our decision to suspend the registration of the two businesses means they can no longer lawfully operate,” said AUSTRAC national manager, Dr Nathan Newman.
With an estimated $2 million in assets and Bitcoin (BTC) now frozen, the question of regulation has come to the fore once again. At the end of 2017, AUSTRAC was given the power to monitor cryptocurrency exchanges in Australia.
As part of its new remit, the financial authority required exchanges to meet the same level of compliance at fiat institutions and banks. One of the main requirements imposed on active exchanges was identity verification. By adding new levels of accountability, using exchanges as a front for criminal activity has become a lot tougher.
Only the Right Regulation Can Help Crypto Exchange
Is tougher regulation the solution to the problem or a contradiction to the fundamental principles of blockchain? Image: RomanR/Shutterstock.com
Despite increasing reporting responsibilities, Karagiozis is alleged to have used exchanges to process drug payments. While due process will now determine the fate of Karagiozis and the affected exchanges, the crypto industry as a whole will have to reassess the issue of regulation.
Although Australian exchanges have taken the lead, the latest incident is a sign that current regulations might not have been enough. With other countries yet to embrace regulation in any form, calls for more structure are likely to ring out across crypto hotspots.
However, for purists, increased regulation remains a sticking point. Anonymous or, for the most part, pseudo-anonymous transactions are a fundamental cornerstone of the industry. By asking customers to provide personal details before making deposits, exchanges are going against a founding principle of blockchain technology.
At this stage, compromises have to be made. For cryptos to become mainstream, protecting consumers and businesses from criminal activity is crucial.
Although complete protection is almost impossible, standards have to improve. However, changes can’t come at the expense of the industry’s underlying ethos. For that reason alone, regulators will have to walk a fine line to stop more crypto-to-crypto exchanges being used for criminal activity.
Featured image: Amophoto_au/Shutterstock.com