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The crypto sector ought to prepare for tougher rules to come

Published on
March 28, 2024
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Regulations that govern the process of exchanging virtual assets, their use as a payment method and as speculative assets is a hot topic in many countries. Given this worldwide deliberation, regulatory requirements and restrictions aimed at the crypto sector will most likely increase globally in the not very distant future.

A risk-based approach for crypto sector entities

For crypto companies around the world compliance with global financial regulations became the subject of much consideration when the FATF (Financial Action Task Force) in June 2019 expanded its list of recommendations to include virtual assets (VA) and virtual asset service providers (VASPs). The FATF, based in Paris, France, is an inter-governmental body setting international standards that aim to prevent money laundering and terrorist financing and the harm these illegal activities cause to society. In October 2021, an updated FATF Guidance for a risk-based approach (RBA) was published to in further depth explain how the recommendations should apply to activities and services with virtual assets.

A risk-based approach calls for organizations to deploy processes of identifying, assessing, and understanding their exposure to money laundering and terrorist financing risks, and to take reasonable and appropriate measures to efficiently mitigate and manage these risks. The FATF is continuously and closely monitoring the crypto sector. Thus, further revision or clarification of the FATF recommendations concerning stablecoins, peer-to-peer transactions, non-fungible tokens, and decentralized finance may be announced at a later stage. Although there are complex variations between different jurisdictions and the regulatory frameworks governing virtual asset activities and VASPs, greater regulation of the crypto sector is in general viewed as a necessity in the fight against money laundering, terrorist financing, and illicit financial activities.  


The cryptocurrency market is increasingly becoming more mainstream

In 2021, there are more than 140 million users of cryptocurrency worldwide. Cryptocurrency market capitalization recently surpassed 1.9 trillion Euros, with Bitcoin (BTC) and Ethereum (ETH) accounting for nearly 60% of the aggregate value. As Bitcoin and other digital assets grow in market capitalization, regulatory scrutiny is very likely to escalate. To a certain extent, this increased scrutiny is encouraging as it confirms greater adoption and that regulators are taking notice. But even though the cryptocurrency market is growing exponentially and increasingly becoming more mainstream it is still extremely volatile by nature which makes it popular among criminals exploiting the fact that Bitcoins are easy to transfer and hard to trace.

Thefts and heists at cryptocurrency exchanges in which cybercriminals have absconded with other people's virtual holdings occur continuously. But the lack of transparency and clear regulations in the crypto sector will not endure, more actions to protect investors and combat money laundering and terrorist financing will be taken. One can only guess what the future holds in this regard. Even in the present tense, VASP's that fail to comply with regulations governing transactions that take place in or through a given jurisdiction can be burdened with hefty fines or even criminal prosecution. In conclusion, sooner or later several entities within the crypto sector need to have robust KYC (Know Your Customer) and compliance protocols in place as part of a comprehensive Anti-Money Laundering (AML) strategy - this will be inevitable.  

An all-in-one KYC and KYB compliance solution

ZignSec utilizes a single interface as our worldwide orchestration layer to easily connect your organization with a comprehensive range of local and global identification and compliance solutions that via the same singular connection will constitute and cater to your organization's automated process for customer onboarding, due diligence, and monitoring. Our SaaS portal providing globally aggregated compliance solutions via a single interface enables KYC (Know Your Customer) and KYB (Know Your Business) compliance locally and cross-border internationally. Whenever new rules and regulations are imposed and there's a need to pivot quickly to comply with new workflows and regulatory requirements, ZignSec allows you to stay ahead of these changing regulatory challenges since you are connected to our SaaS portal that continuously aggregates pre-emptive developed solutions. Via the same portal, you access our Compliance Workflow Manager (CWM), a low-code solution that enables you to build, optimize, and automate workflows while connecting them with global and local compliance solutions. You are in full control of all your chosen identification and compliance features in a visual hands-on manner as you create, modify, and roll out processes and workflows with a visual drag-and-drop feature. By utilizing our CWM, your organization gains the agility and the ability to quickly adapt to change.

Your organization doesn't need to expend additional time and resources finding new KYC and KYB-focused compliance providers or adopt several service agreements. The ZignSec SaaS portal is where different compliance solutions can be added as required in order to meet requirements. This means that your organisation only needs to hold one service agreement with ZignSec, allowing you to create and manage all your compliance workflows and processes through our SaaS portal.

Contact us at sales@zignsec.com to learn more or book a demo.

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