Leaders across the cash-to-crypto industry, including Bitcoin ATM (BTM) operators DigitalMint and Coinsource, blockchain analysis platform Chainalysis, and others, have announced the formation of the Cryptocurrency Compliance Cooperative (“CCC”). A collaborative association, the mission of the CCC is to create a safer environment for all consumers and legitimise the cash-to-cryptocurrency industry by bolstering compliance standards that are deemed by many to be currently insufficient.
“The nefarious use cases plaguing this industry are well documented by several law enforcement agencies, and include fraud, elder abuse, and drug and human trafficking,” said Seth Sattler, Director of Compliance for DigitalMint and leading contributor of the Cryptocurrency Compliance Cooperative. “While a small number of Bitcoin ATM operators go above and beyond with know your customer (KYC) and anti-money laundering (AML) protocols, others in the cash-to-crypto industry simply turn a blind eye and are complacent to these bad actors by simply applying the bare minimum customer protections, which in many cases allow for completely anonymous transactions.”
Organisations encouraged to apply to the CCC include cash-based cryptocurrency MSBs, regulatory bodies, financial institutions, suppliers, non-governmental and law enforcement agencies. Meeting on a minimum quarterly basis, the CCC will allow members to stay abreast of regulatory updates, new industry standards and research. Moreover, members will share best practices and learn how to collaborate with industry leaders, regulators, and law enforcement on how to enforce deeper and more robust compliance protocols. In addition, the CCC will also look to stay ahead of developments and trends among threat actors, learning how to best mitigate fraud through the application of ever-improving technology and forensic tools.
“Unfortunately, many BTM operators feel that merely asking for a cell phone number is enough due diligence to absolve them of their mandated KYC requirements,” said Bo Oney, Executive Vice President of Operations and Head of Compliance at Coinsource. “Such lax provisions provide a safe haven for bad actors to abuse the machines for nefarious purposes. The CCC is seeking to bolster regulatory requirements for the benefit of all BTM users and operators. This will require input from the most knowledgeable in the industry, all with the goal of making the cash-to-crypto space as safe as possible for consumers.”
Since their first deployment in the US in 2014, BTMs and other cash-to-crypto point-of-sale locations have helped individuals effortlessly access the world of cryptocurrencies. These machines, which resemble a traditional ATM, allow users to purchase cryptocurrencies with cash and, according to How Many Bitcoin ATMs, have surpassed 42,000 installations across the US.
“Lax compliance policies and high rates of illicit activity have long plagued the reputation of Bitcoin ATMs,” said Caitlin Barnett, Director of Regulation and Compliance, Chainalysis. “We are thrilled to support this initiative led by two leaders in the space to build trust in Bitcoin ATMs and promote more financial freedom with less risk.”
According to an independent report conducted by the State of New Jersey Commission of Investigation, nearly 75% of the BTM operators with kiosks in the state allowed certain transactions to take place without requiring the customer to provide any information outside of a cellphone number. Over half of these operators allowed for cryptocurrency transactions up to $900 with just a cellphone number, or in some cases, no information at all. Due to the prevalence and accessibility of prepaid cellphones, commonly known as “burners”, simply relying on the collection of a phone number to satisfy FinCEN KYC requirements is not a reliable way for operators to confirm identity and eliminates any reasonable transaction monitoring method to detect agents that assist with laundering illicit proceeds on behalf of nefarious actors.
“We must do better,” added Mr. Sattler. “This isn’t just an industry group – this is a movement. It’s our hope that others heed our call and join this cooperative as we push for enhanced and modernised regulations in the best interest of public safety.”
The initial members of the CCC include:
- Anti-Human Trafficking Intelligence Initiative
- Halo Privacy
- Metropolitan Capital Bank
- Palmera Consulting
- Royal Business Bank
- Surety Bank
- The Knoble
- Titan Bank, NA
- Trust Stamp