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Regulatory measures aimed at cryptocurrency in 2022

Published on
March 28, 2024
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In 2022, new requirements and laws are expected to hit the crypto space of some countries. However, the persistent lack of a uniform approach to regulation still constitutes the most significant challenge for the industry. A severe company dealing with cryptocurrency and virtual assets strives to cover all bases by implementing automation for its AML compliant KYC and KYB processes and real-time monitoring and risk assessment of transactions and wallets to avoid dealings with criminals and sanctioned entities.

Still a worldwide mixture of divergency regulatory requirements

The total value in the global crypto market has in five years risen from around $16 billion to approximately $2.6 trillion, displaying an average annual growth rate exceeding 150%. This exponential growth and the rapid spread of cryptocurrency and virtual assets have drawn increasing attention from regulators worldwide. The crypto sector's regulatory issues won't be solved in their entirety in 2022.

Still, some new AML (Anti Money Laundering) regulations and KYC/B (Know Your Customer/Know Your Business) requirements in specific crypto space areas are expected to emerge in some countries. The governmental rejection of crypto will likely endure in some parts of the world, whereas the overall global trend tilts towards more adoption rather than less. The international differences in the cryptocurrency adoption span from El Salvador - which officially has adopted Bitcoin as legal tender - to China, which has banned digital tokens such as Bitcoin and has deemed all transactions of crypto-currencies illegal. Within the immediate future, the global crypto regulatory oversight remains uneven.

Crypto exchanges, investors, other regulated entities, and financial operations in the crypto space must adjust to a mixture of divergency regulatory requirements and approaches in different parts of the world, stipulating complex compliance challenges indeed. Cryptocurrency and its novel financial institutions are likely to be globally regulated similarly to traditional financial institutions, eventually.

FATF’s set deadline draws near

The Financial Action Task Force (FATF) sets international standards that prevent anti-money laundering and terrorist financing. FATF's finalised updated Guidance for a Risk-Based Approach for Virtual Assets (VA) and Virtual Asset Service Providers (VASP) was published in October last year. FATF urges nations to intensify the implementation of these standards, not least the travel rule.

The extended travel rule encompasses VA's and VASP's, requiring that any virtual-asset transfer of above USD/EUR1,000 must include personal details of both the originator and beneficiary. The crypto sector currently lacks global safeguards to prevent misuse of VASPs for money laundering and terrorist financing. The absence of regulation or regulatory compliance also enables continued misuse of virtual assets through jurisdictional arbitrage, which implies taking advantage of the disagreements between competing legal jurisdictions. Countries that have implemented the travel rule include the United States, Switzerland, and Singapore. Out of 128 reporting jurisdictions, more than half have yet to implement FATF's revisited regulatory guidance. As the set deadline draws near, some countries may push to implement compliance measures in 2022.

There are specific areas of the crypto industry that will probably receive regulatory attention in various parts of the world in the coming twelve months. The US, the UK and the EU are currently in the process of working out Stablecoin regulations. DeFi (Decentralized Financial Services) provide a rapidly expanding range of financial services, from lending to insurance. This growth area will receive scrutiny from regulators in various parts of the world, especially regarding consumer protection. Regulators will also adopt a more proactive approach towards non-fungible tokens (NFT) in the time ahead as the NFT space nowadays constitute a billion-dollar industry.

Cryptocurrency-fuelled ransomware attacks remain an enormous security issue, and exploitation of technical code vulnerabilities will likely increase against exchanges in 2022. Companies operating cryptocurrency exchanges must be able to verify that there are no code supply-chain compromises that enable transactions to be conducted without the consent of all parties involved. Implementing the technology and the processes that serve as defensive countermeasures will be crucial for crypto exchanges.

All the challenges facing companies within the crypto space require long-standing security strategies and implementing related technology and software or using services that enable automated KYC and KYB processes that meet AML regulations. Where new clear regulation is absent, adhering existing legal framework is always wiser than passively being exposed and unprotected.

Competitive advantage through compliance in the crypto space

ZignSec’s worldwide real-time crypto risk monitoring and scoring, checks wallet addresses for connections to criminal and sanctioned entities, which reduces platform vulnerability exposure. We enable easy monitoring that facilitates swift compliance decisions using risk scores for each address or transaction.

Detection of criminal activity is boosted with sophisticated transaction analysis scanning billions of data points and crypto addresses. This feature updates risk scores in real-time, reducing decision-making reaction time when dealing with criminal elements. It also automates transaction monitoring, increasing the speed and accuracy of auditing and investigations. Our Real-time Crypto Risk Monitoring elevates security measures and optimises compliance efforts, making it easy to run and scale your business securely. We enable risk assessments for BTC, ETH, BCH, LTC, BSV, XRP and XLM, increasing your extent of security.Our Real-time Crypto Risk Monitoring facilitates decision-making, rendering the compliance and reporting process a smoother one altogether. Its powerful AI assesses crypto addresses and transactions and generates risk scores and reports that are easy to present and understand.

Like with credit scores, higher risk profiles are given a lower score, while lower risk profiles receive a higher score for easy monitoring. Our crypto forensics technology is trusted globally by financial institutions, VASPs (Virtual Asset Service Providers), fintech, regtech, law enforcement, and regulators. Our compliance orchestration platform provides a single interface that connects your organisation with a comprehensive supply of software solutions and services. This enables complete KYC/B compliance processes that meet AML requirements globally and locally.

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