Between the decline in cryptocurrency prices and the bankruptcy of several large players in the industry, today's cryptocurrency companies face no shortage of challenges. However, cryptocurrency companies should not lose sight of their day-to-day obligations, particularly those concerning compliance.
In fact, both state and federal regulators continue to bring enforcement actions against cryptocurrency companies over alleged compliance deficiencies, resulting in substantial monetary penalties and, in extreme cases, even arrest of the companies' founders.
The risk posed by inadequate compliance shows no signs of abating. Early-stage cryptocurrency companies can lay a foundation for future success by continually assessing their compliance obligations through a risk-based approach, and quickly addressing any deficiencies, particularly during periods of rapid expansion, as well as by vigilantly monitoring for new regulatory developments.
It is no secret that cryptocurrency regulation remains complicated, with several government regulators adopting differing and sometimes competing approaches.
Cryptocurrency companies of all shapes and sizes would benefit from undertaking a dispassionate assessment of the compliance risks facing the company. The Financial Action Task Force (FATF), an independent, inter-governmental body that publishes global anti-money laundering compliance standards for both companies and governments, recommends that financial institutions, including cryptocurrency companies, adopt a risk-based approach to compliance.
This approach involves considering a company's products, services, business model, customers, geography, and other factors in order to assess, and then address, the greatest risks to the company. As a company evolves and grows over time, these risks should be continually re-evaluated to ensure the company stays ahead of any developing compliance risks.
Cryptocurrency companies are often regulated by an alphabet soup of government entities. Some of the most common and well-known regulations include, for example:
3 tips for crypto startups preparing for continued compliance by Jenna Routenberg originally published on TechCrunch