Overcoming Regulatory Hurdles in the Digital Currency Space

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Overcoming Regulatory Hurdles in the Digital Currency Space

As businesses navigate the complex world of digital currencies, understanding the regulatory landscape is crucial. We asked four experienced Chief Financial Officers and founders to share their insights on this topic. From overcoming SEC hurdles to establishing self-regulatory bodies, here are the key regulatory hurdles they highlighted and their advice on how to overcome them.

  • Overcoming SEC Hurdles
  • Addressing Anti-Money Laundering Compliance
  • Leveraging RegTech for KYC/AML Compliance
  • Establishing Self-Regulatory Bodies

Overcoming SEC Hurdles

According to recent press, the US SEC seems dead-set against innovation, suing, fining, or otherwise making things difficult for US companies using cryptocurrency and blockchain. The reluctance in the USA is a boon for pro-crypto nations such as Hong Kong, Dubai, Singapore, and the Caymans, with many crypto companies considering relocation.

While the Howey Test was a handy yardstick in 1934, new digital assets require new regulations. Different regulators disagree on whether Bitcoin is a currency, a commodity, or a security, while the SEC stated that XRP was a security when sold to institutions, but not a security when sold to individuals. Confused? “The Jabberwocky” makes more sense.

Some crypto companies wish to wait for US regulatory consensus, which could be another two to three years, while others have subsidiaries in crypto-friendly nations, ready to jump ship.

Cryptocurrencies are decentralized and worldwide assets for the future; new regulations are needed to reflect this.

Jeremy Britton
Chief Financial Officer, Boston Trading Co


Addressing Anti-Money Laundering Compliance

In my experience as a CFO working in Myanmar and as a CPA, the biggest regulatory hurdle businesses need to prepare for is compliance with money laundering concerns. Because of the inherent nature of digital currency, which makes it difficult to trace the source of funding and ownership identities, regulators are especially concerned with the use of funds for anti-government activities.

There could be many things governments and corporations can do about this. One of them is maintaining transparent and authenticated documentation of the sender or receiver of such currencies by the corporation, along with valid documentation for the reasons for such usage.

Manish Gupta
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Manish Gupta
Chief Financial Officer, Aureum Palace Hotels and Resorts


Leveraging RegTech for KYC/AML Compliance

Navigating the complex regulations around digital currencies is certainly challenging for businesses today. One of the biggest hurdles is staying compliant with Know Your Customer (KYC) and Anti-Money Laundering (AML) laws.

Strict KYC/AML rules require extensive identity verification for all crypto transactions. This ensures legitimate use of digital currencies, but also creates heavy compliance burdens for companies.

The solution lies in leveraging regulatory technology (RegTech). Advanced identity-management platforms automate KYC/AML processes, streamlining compliance while still adhering to reporting requirements.

Integrating a robust RegTech system reduces the friction of regulatory compliance. Companies can confidently and efficiently offer cryptocurrency services, knowing they have the tools to stay within the law.

Proactively addressing regulations through the right technology unlocks huge opportunities in the digital asset space.

Ankit Prakash
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Ankit Prakash
Founder, Sprout24


Establishing Self-Regulatory Bodies

Businesses should proactively establish industry-wide self-regulatory bodies or associations to set standards, best practices, and guidelines for engaging with digital currencies. Industry self-regulation demonstrates a commitment to compliance and helps shape the regulatory environment.

By taking the lead in setting standards, businesses can contribute to a more favorable regulatory landscape. For example, companies in the cryptocurrency exchange industry could collaborate to establish a self-regulatory organization that establishes transparency requirements, security standards, and best practices for customer protection.

This self-regulation would help overcome regulatory hurdles by demonstrating industry compliance and providing a platform for dialogue with regulators.

Roy Lau
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Roy Lau
Co-Founder, 28 Mortgage


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