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The Swiss Financial Market Supervisory Authority (FINMA) has released its 2019 Risk Monitor report that outlined the dangers that the crypto industry brings to the financial market. Money laundering and terrorist financing came out on top as the biggest risk posed by the crypto sphere due to its anonymous design and transaction speed, both of which deeply appeal to illicit actors.
The paper highlighted the fact that the Swiss financial center has always been a global leader when it comes to cross-border payments for global clients. As such, money-laundering risk is high in the country and the emergence of the crypto industry increases this exposure significantly.
“In addition to these traditional money-laundering risks, the financial industry also faces new risks in the area of blockchain technology and the cryptoassets that are attracting growing interest from clients. Although these new technologies promise efficiency improvements in the financial industry, they also accentuate the threats posed by money laundering and the financing of terrorism due to the greater potential anonymity they involve, as well as the speed and cross-border nature of the transactions,” the paper read.
Potential damage to Swiss reputation
FINMA also warned that financial institutions that aren’t diligently putting up safeguards around this industry may damage Switzerland’s reputation. This could result in major damages that would slow down the digitization that’s slowly taking over several industries including the financial sector.
Although the regulatory agency acknowledges the benefits that blockchain technology will bring in the financial sector, it will maintain its vigilance in monitoring this crucial development. Finma Chief Executive Officer Mark Branson said that they’re being careful with this approach and is trying to create a strategy that would oversee and nurture the nascent market, Bloomberg reported.
Keeping vigilance amidst fintech evolution
“We want to give them a chance and we have done a lot to remove unnecessary barriers to enable projects. But we are also not starry-eyed as these new business models come with new risks, or old risks in new shapes,” Branson said.
The Swiss federal government is looking to improve its existing financial regulation to include blockchain technology and the emergence of digital assets. And echoing the concern of the risk report, policymakers will be strengthening Know Your Customer regulations and Anti-Money Laundering guidelines moving forward.
