during the decline With cryptocurrency prices and the bankruptcies of some of the industry’s biggest players, today’s cryptocurrency companies have no shortage of challenges. However, cryptocurrency companies should not lose sight of their day-to-day obligations, especially regarding compliance.
In fact, both state and federal regulators continue to take enforcement action against cryptocurrency companies for alleged non-compliance, resulting in hefty fines and, in extreme cases, company founders. are even arrested.
The risks posed by poor compliance show no signs of abating. Early-stage cryptocurrency companies will continue to assess their compliance obligations through a risk-based approach, quickly address deficiencies, especially during periods of rapid expansion, and closely monitor new regulatory developments to ensure they are well positioned for the future. can lay the foundation for the success of
It’s no secret that cryptocurrency regulation remains complex, with several government regulators adopting different and sometimes competing approaches.
1. Assess business compliance risks and build a well-resourced compliance function
Cryptocurrency companies of all shapes and sizes can benefit from a sober assessment of the compliance risks they face. The Financial Action Task Force (FATF), an independent intergovernmental body, publishes global anti-money laundering compliance standards for both businesses and governments, requiring financial institutions, including cryptocurrency companies, to comply. We recommend taking a risk-based approach.
This approach should consider a company’s products, services, business model, customers, geography, and other factors to assess and address the greatest risks to the company. As companies evolve and grow over time, these risks must be continually reassessed to ensure companies stay ahead of compliance risk developments.
Cryptocurrency companies are often regulated by an alphabet soup of government agencies. Some of the most common and well-known regulations include:
- Registration and licensing requirementsCryptocurrency companies often need to register with various government regulators in order to do business, but companies may not be immediately aware of the requirements. For example, many cryptocurrency exchanges and ATMs are required to register as money service businesses with the U.S. Department of the Treasury’s Financial Crimes Enforcement Network. Similarly, the New York State Department of Financial Services (NYSDFS) requires that virtual currency companies obtain a “bit license” if they do business in New York or with New York residents. .
- Understand anti-money laundering and customer regulationsMany cryptocurrency companies are required to comply with Know Your Customer (KYC) regulations. This requires these companies to gather important information about their customers during the onboarding process. Anti-money laundering (AML) laws also require businesses to monitor transactions and report suspicious activity. Together, these laws are designed to combat criminal activity and terrorist financing, and prevent dealings with sanctioned entities and individuals. While these laws are widely known, compliance has proven difficult in practice and the cryptocurrency company continues to be cited for his AML/KYC compliance violations.
