When the general public thinks about virtual assets, they often also think of crime. Hacking, ransomware, sanctions and darknet marketplaces such as Silk Road and Hydra have all littered the headlines over the years, leading to a generalized view that the virtual asset world is something of a wild west – one that is largely unregulated and bereft of respect or adherence to rules.
In the old west, when a sheriff was unwilling or ill-equipped to reel in cowboys running amok, it was the citizens who assumed the mantle of protecting themselves and their property. And while the contemporary crypto landscape doesn’t call for reckless vigilantism, it does create the chance for crypto companies and their counsel to come together to establish the rules of engagement for the new frontier.
Worldwide, regulators have started to apply regulation to the cryptosphere – often with good intent but misplaced priorities. They’re armed to regulate the old world of intermediaries rather than the new, trustless protocols enabled by crypto.
Consider the Financial Action Task Force (FATF), which recently updated its guidance to require that virtual assets and virtual asset service providers (VASPs) comply with the same rules as traditional financial institutions. This includes rules concerning licensing or registration, know your customer (KYC) and anti-money laundering (AML) rules, transaction monitoring and reporting, as well as international co-operation agreements.
But many of these regulations were conceived long before the advent of the virtual asset industry, and the reality is that bringing our rulesets in line with a sector evolving as quickly as ours will take time. Until we reach that point, crypto companies and their counsel are tasked with operating in the gray – applying old rules to new fact sets – an approach that leaves ample leeway for both interpretation and creativity.
Personally, as a chief compliance officer in a fast-moving yet still fledgling sector, I see this as an opportunity – an opportunity to shape future market regulations, to influence and organize an emerging industry, as well as to help define the standards and best practices that can serve as the basis for self-regulation in several critical areas, including customer protection, market manipulation, financial crime and data protection.
This opportunity to come together and help each other to stay up to date and compliant, in addition to providing a unique chance to shape the way in which regulation will ultimately be crafted and impact upon the virtual asset industry.
It’s time for the more established blockchain and crypto companies to give back by offering dedicated training delivered by compliance officers to startups that are just beginning their journey and by sharing information on typologies and red flags to better prevent financial crime.
Perhaps more important, by working together we can collectively determine a common approach on how to interpret and adhere to both the old and the new, as we transition towards a brighter digital future.
Collaboration works. I’ve seen it firsthand.
When the Swiss regulator issued its guidance on blockchain payments, I met with my peers here in Switzerland to discuss practical solutions on how to comply with the travel rule and what concrete actions and steps that we – both individually and collectively – should take in response.
That same year, we again collaborated in an effort to define standards for a protocol for travel rule compliance. This is how OpenVASP Association was born. I could offer many different stories like this where collaboration was the focal point for a rising tide across the industry here in Switzerland – but in essence, they boil down to simplifying common issues as a collective and deducing shared solutions for the benefit of a sector still largely in its infancy.
That’s collaboration in action.