It should not be breaking news to anyone that the digital asset market is developing rapidly. With crypto-assets becoming ever more commonplace, opportunity derived from crypto assets has never been more significant, and this is reflected in the demand of consumers, and firms looking to provide digital asset products.
According to Karan Kapoor, Head of Regulatory Solutions and RegTech at Delta Capita, a leading global managed services, technology solutions and consulting provider, the key to successfully harnessing growth in the digital asset industry is through adopting regulation early on.
Institutional investors now beginning to enter the market will only cause the growth momentum to accelerate. The likes of J.P. Morgan, Standard Chartered and Northern Trust, to name a few, have all made bold moves to enter and capitalise on this growing market.
The retail utilisation of crypto assets, too, has seen a stark increase in popularity. The number of accounts opened at crypto exchanges was estimated to have hit 191 million, consisting of 101 million unique users, in the second half of 2020. Consumers no longer see digital assets as just a “hype”.
The Increasing Emphasis on Regulation
As digital assets become ever more entrenched in global financial markets, regulators are increasing
their focus. More robust digital asset regulations are expected to be launched in the near future, as
regulators look to maintain market trust, fairness and transparency to support the rapid growth the
digital assets industry is experiencing.
Each country is in the process of firming up its regulatory response to support the vast demand for
Currently, the FCA only holds security and e-money tokens under its regulatory perimeter. However, further global developments include the EUs plans to implement the new Markets in Crypto Assets (“MiCA”) regulation by 2024, poised to be a game-changing regulation having operational impacts across the entire European digital assets industry’s value chain. Its framework provides legal certainty for crypto assets not currently covered by existing EU legislation and establishing uniform rules across the EU for service providers and issuers.
AML Requirements for the Crypto Asset Industry – The Global Common Denominator
There remains relative uncertainty around the global digital asset regulatory landscape, as it continues to evolve swiftly. However, one common denominator is bringing all market players to the table – the requirement to abide by the AML Regulations.
As of January 2020, Crypto assets wallets and providers are now considered regulated entities under the Money Laundering and Terrorist Financing (Amendment) Regulations 2019 and subject to AML rules and regulations and is being implemented in the UK via the FCA Cryptoasset Registration process.
The introduction of AML regulations has not negatively impacted the industry, as evidenced by the continual growth of the crypto asset sector, despite the initial feedback expressed by providers fearful of client reaction to collecting additional personal information.
Instead, it presents the blueprint for a successful approach to riding the wave of the crypto-asset industry’s expansions; ensuring that your firm remains on-top of the regulatory changes on the horizon.