Without clear regulatory standards, how crypto firms determine and manage their compliance risks and processes are a key business strategy, panelists said at the Bitcoin 2022 conference
Panelists discussed compliance and regulation at the Bitcoin 2022 conference in Miami Beach, Fla.
MIAMI BEACH, Fla.—Increased regulatory guidance is crucial to the continuing growth of the cryptocurrency sector in the U.S., said panelists Thursday at one of the largest bitcoin conferences of the year.
But uncertainty about how the U.S. will write its cryptocurrency regulation remains one of the top barriers for both crypto firms looking to enter the U.S. market and for digital assets seeking to attract institutional investors, according to Compliance & Regulation panelists at the Bitcoin 2022 conference in Miami Beach, Fla.
Without clear regulatory standards, the ways that crypto firms navigate their compliance risks and processes become a key business strategy, they said.
Blockchain analytics provider Elliptic Enterprises Ltd., which provides information that helps identify crypto-related criminal activity, has seen growing interest in its services and data from both crypto firms and traditional financial institutions, John Melican, the company’s chief of external affairs, said Thursday.
John Melican, Elliptic Enterprises Ltd.’s chief of external affairs, at the Bitcoin 2022 conference
“That’s what we’re seeing and that’s what we’re building is the capacity to serve crypto at scale. And we’re building this capacity to bring in assets as quickly as they’re demanded because it’s an ever-changing environment,” Mr. Melican said.
Regulatory uncertainty in the U.S. has been the primary obstacle to greater acceptance of digital assets by institutional investors, according to Jeffrey Howard, head of North America business development and institutional sales at brokerage firm OSL.
President Biden last month signed an executive order that directed federal agencies to report on digital currencies and consider new regulations. Many in the crypto world see it as a change to a more neutral attitude toward cryptocurrency.
“I think the executive order was a step in the right direction,” Mr. Howard said. “I think they’re trying to do it the right way and I think over time they will…As painful as it is, I think over time if they get it right, it’ll be a good thing for the industry.”
Crypto companies are dealing with various federal and state regulators that often compete with each other to rein in the digital-asset market, said Hailey Lennon, a partner at law firm Anderson Kill PC who specializes in regulatory compliance. She said the various hoops crypto firms need to jump through from both state and federal regulators can sometimes discourage crypto firms from entering the U.S. market.
“I think we’re going to see that regulators become a lot more active in this space because even [Senator Elizabeth] Warren and individuals in the government have said, ‘Hey, you don’t need to wait ‘til there’s collaboration among all these different regulators. Your purpose is to protect consumers, and you all receive a lot of complaints about bitcoin and crypto, go do something,’” Ms. Lennon said.
Lacking guidance, each crypto firm has had to determine its own risk appetite, according to Simon Douyer, the chief operating officer of cryptocurrency trading service firm SheeldMarket. These include direct risks, such as determining if a crypto transaction is connected to addresses under sanctions or derived from illegal activities, and indirect risks that may derive from business clients, he said.
“The issue really is about the threshold,” he said. “Where do you put your risk threshold?”
“And this gray area here is really, it’s everyone’s secret sauce,” Mr. Douyer said. “You just know where you put your risk threshold and right away just decide to say, ‘Okay. I’m going to accept these funds.’”
These comments came as Treasury Secretary Janet Yellen on Thursday provided insight into how the federal government views digital assets, saying that the design and development of a digital dollar would likely take years if the U.S. chose to create one. She also outlined the various questions the Biden administration is weighing as it considers ways to make payments faster in the U.S.
