Crypto Regulation: Apprehending Illicit Activity

By Andrew Simpson, Chief Operating Officer, Alessa by Tier1 Financial Solutions

Many financial institutions are still examining ways to monetize opportunities in the evolving and increasingly sophisticated crypto markets. However, while the extent of regulation for certain cryptocurrency transactions and crypto-to-crypto exchanges differs by jurisdiction, one thing is clear—most countries seem to agree that the commercial exchange of cryptocurrency for fiat currency should be subject to KYC, AML, and securities obligations.

Existing FinCEN regulations and advisories clearly state that it is the responsibility of all financial institutions to identify and report suspicious activity concerning how criminals and other bad actors exploit virtual currency for money laundering, sanctions evasion, and other illicit financing purposes.

FinCEN Director Kenneth A. Blanco said in September 2020, “Banks must be thinking about their crypto exposure as well. These are areas your examiners, and FinCEN, will ask you about when assessing the effectiveness of your AML program… If banks are not thinking about these issues, it will be apparent when examiners visit.”

Virtual asset service providers (VASPs) can be higher risk, but they can also be very lucrative customers. As of January 2020, Coinbase, a U.S. cryptocurrency exchange, oversaw $21B in assets for 35 million users who buy and sell cryptocurrency by connecting their bank accounts to their Coinbase accounts and became the first U.S. exchange to go public.

Read the full article on Traders Magazine.

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