Creative crypto compliance: Vasps, MiCA, & evolving compliance standards

The critical role of compliance

Compliance in the crypto world is not just about adhering to rules; it’s about understanding and implementing them to support innovation while ensuring legal and ethical standards. Anne Rothwell emphasised the importance of being a collaborative partner in this process, stating, “It’s being a partner to the teams and explaining and educating them as to why we need to do something.”

The impact of technology and tools

Technology is pivotal in ensuring compliance, especially in a field as dynamic as cryptocurrency. As highlighted by Ari Redbord, TRM Labs has developed tools to monitor transactions and ensure adherence to AML regulations. “We’ve built a tool … that helps compliance officers like Anne ensure that her platforms are not transacting with sanctioned actors or terrorist financiers or darknet markets.. Fatif, the Financial Action Task Force or the UN of Anti-money laundering, put out a report … that discussed the importance of implementation,” Ari explained.

Anne followed up on that point, also making the case that one needs to accommodate the scope of the tools in terms of policy. In the case of Pionew, for example, they have banned all privacy coins on their platform until tools like those from TRM can monitor them effectively.

Understanding MiCA and the importance of VASP licenses in crypto compliance

As the cryptocurrency market matures, understanding and adhering to regulatory frameworks like Markets in Crypto-Assets Regulation (MICA) and obtaining a Virtual Asset Service Provider (VASP)  license have become pivotal for businesses operating in this space.

MICA, a proposed regulation by the European Union, aims to provide a harmonized regulatory framework for crypto-assets. It’s designed to protect investors and preserve financial stability while fostering innovation and fair competition. Anne highlighted the impact of such regulations, noting, “New legislation is coming in… and I’m pretty sure that there’s going to be more sharing of bad actor information at a higher level.”

In this evolving regulatory landscape, obtaining a VASP license is crucial. This license ensures that crypto businesses comply with international anti-money laundering (AML) and counter-terrorism financing (CTF) standards. It’s not just a regulatory requirement; it’s a step toward building trust and credibility in the ecosystem. As regulatory bodies worldwide intensify their scrutiny of crypto transactions, having a VASP license becomes a testament to a company’s commitment to compliance and security.

Preparing for the future: The fast-paced nature of crypto

The rapid evolution of the crypto space was acknowledged, with the panelists noting that what happens in ten years in crypto could equate to much more in other industries. Ari Redbord reflected on this: “Ten years in crypto is basically at least half a lifetime.”

Caner echoed this sentiment and noted that if anything, the trend was moving towards specialisation, saying, “I see an indication [of] more specialist products and more specialist companies, and I think the compliance and legal professionals will follow that up. [We will start to see], for example, more specialist crypto companies, more specialist companies only, [unlike] huge banks offering 200 different products but focusing on two or three products. I think compliance professionals will also be very tech-focused, able to maybe go through five or six IT tools to track that, but also specialise in certain products because the specialised product means specialised risk coming with that.”

Collaboration is key

A recurring theme in the discussion was the need for collaboration and information sharing among various stakeholders. This collaboration is crucial for combating illicit activities and ensuring a safe and compliant crypto ecosystem. Anne stressed the importance of this, saying, “There should be more sharing of bad actor information at a higher level. We can share within our groups [but platforms]
 like TRM and the other providers of those tools have so much data and so much information they can point to. ‘There is a person sitting at the end of this address. He’s sitting in whatever city it is. We can see the VPN is obscured or whatever,’ [in other words] there’s so much information and data there that it should be more shareable between everyone in this system, and then it will be easier, perhaps, to just block them.”

Conclusion

The insights from Ari Redbord, Anne Rothwell, and Caner Sevnic provide a valuable perspective on the complexities and necessities of compliance in cryptocurrency. As the industry continues to grow and evolve, the role of compliance professionals will become increasingly crucial. Their ability to adapt to new challenges, leverage technology, and collaborate across sectors will be vital to ensuring a safe and thriving crypto ecosystem.

Perhaps you’re interested in discovering how crypto platforms can win the compliance race?