Discover major changes in crypto regulations: US enforcement actions, global frameworks, and what lies ahead for compliance.
Regulators around the world are constantly adapting to the evolving landscape of crypto regulations. They face the challenge of addressing compliance gaps and keeping up with rapid innovation in the industry. As their workload increases, regulators are feeling the pressure to act swiftly. This is evident in the recent actions taken by the U.S. Securities and Exchange Commission, which filed lawsuits against Coinbase and Binance, signaling a heightened regulatory crackdown on the crypto industry.
Regulators are actively working on establishing a unified framework for digital currency, conducting a grand experiment of sorts. This has piqued the interest of institutions and funds that are curious about crypto. They eagerly await the final outcome. However, the constantly changing stance of regulators, like Christine Lagarde’s shift from dismissing crypto to emphasizing the need for regulation, makes it difficult for the industry to predict how crypto compliance will shape up in the future.
The Evolving Landscape Of Crypto Compliance: Harnessing Blockchain And Global Frameworks
Crypto compliance is not entirely shrouded in uncertainty. The blockchain’s inherent immutability offers a real-time and reliable audit trail, leading many to believe that it will impact auditors. Moreover, robust guidelines for anti-money laundering (AML) and know-your-customer (KYC) frameworks already exist in international markets.
Financial hubs worldwide are actively developing compliance frameworks to address key risks associated with digital currencies, such as money laundering and terrorism financing. Europe, for instance, recently adopted the groundbreaking “markets in crypto-assets (MiCA)” rules, along with dedicated regulations for crypto AML. Similarly, Singapore and Hong Kong have implemented their own measures, including AML, KYC, and combating terrorism financing (CFT) guidelines.
The SEC Lawsuits: Implications For Crypto Companies And Regulatory Landscape
Crypto companies in the United States encounter a difficult regulatory environment. Lawsuits recently filed by the SEC against Coinbase and Binance highlight the intricate nature of these regulations. These legal actions have significant implications for the industry as they demonstrate the SEC’s determination to enforce compliance with securities laws.
The outcomes of these cases have the potential to reshape the digital currency market by establishing the SEC’s authority over the industry. For years, the industry has contended that tokens are not securities and should not fall under SEC regulation.
The perception that crypto has fewer anti-money laundering (AML) and compliance obligations compared to traditional finance is no longer accurate, thanks to the establishment of robust guidelines. In terms of AML, both crypto and traditional finance now share similar requirements. These include measures such as conducting customer due diligence, performing sanctions and AML screenings, and continuously monitoring transactions.
Closing The Gap: Crypto Licensing And AML Requirements In Line With Traditional Finance
The introduction of the “travel rule” further enhances transparency in digital currency transfers, enabling virtual asset service providers to identify counterparties and screen transactions. Obtaining licensing under regulations like Singapore’s Payment Services Act entails fulfilling the same AML requirements as traditional counterparts.
With the growing importance of compliance and licensing, businesses in the industry are actively aligning themselves with strong regulatory frameworks similar to those in traditional finance. This enables them to effectively carry out due diligence for clients involved in digital assets, particularly hedge funds and asset managers with their own strict compliance policies.
To achieve this, industry players are forming partnerships with regulatory technology (regtech) providers, ensuring the implementation of systems and tools that adhere to the best practices for anti-money laundering (AML) measures. These proactive efforts aim to enhance compliance capabilities and streamline regulatory processes in the digital asset space.