Back to the list

The Role of Compliance in the Crypto Industry

03 April 2024 05:38, UTC
Juan Allan

The crypto market has made significant progress internationally, becoming one of the most profitable industries.

According to some recent studies, it is estimated that 4.2% of the population currently owns digital assets, and about 420 million users have joined the cryptocurrency industry.

Being considered one of the fastest-growing industries, the cryptocurrency market accounts for millions of daily transactions worldwide. That’s why compliance becomes fundamental as a means to prevent economic crimes such as money laundering from occurring.

Claudio Cossio, co-founder of Meta Pool said “Regulations play a key role in the new digital asset markets, helping companies keep users safe from potential financial crimes like money laundering”

Why is compliance important in the crypto industry?

Compliance plays a fundamental role within the crypto industry to prevent various financial crimes such as money laundering from occurring, some of the areas where compliance plays a fundamental role within the crypto industry are:

Market Stability: Compliance contributes to the stability of the cryptocurrency market by establishing clear rules that all participants must follow. This reduces volatility and creates a more predictable environment for investors and users.

Protection Against Fraud and Money Laundering: Cryptocurrencies can be used for illicit activities due to their decentralized and anonymous nature. Compliance regulations help prevent fraud and money laundering by requiring exchange platforms to verify the identity of their users and monitor suspicious transactions.

Consumer Confidence: Compliance regulations increase consumer confidence by ensuring that cryptocurrency companies operate transparently and responsibly. This is vital for the mass adoption of cryptocurrencies.

Integration with the Global Financial System: For cryptocurrencies to be widely accepted and used, they must integrate with the traditional financial system. Compliance with financial regulations is a crucial step to achieve this integration.

The FATF as a Regulatory Body

Compliance regulations can be described as rules or laws that companies must follow to avoid potential crimes such as financial fraud and money laundering.

Usually, each country has its own set of compliance rules managed by the local compliance regulator.

One of the main international control authorities in compliance matters is known as the Financial Action Task Force or FATF. According to its official website, the FATF can be described as “the global money laundering and terrorist financing watchdog.”

The main role of the FATF is to establish international compliance standards, such as the Travel Rule, that countries must follow to prevent financial crimes from occurring.