A CBDC is a new type of money that uses blockchain technology to create a unique digital identity and is issued and guaranteed by a central bank. Its value is linked to the national fiat currency, and as a digital innovation has the potential to be used by both households and companies to store value and make payments.
The global market landscape was thoroughly altered by the COVID-19 pandemic, which ushered in a state of distress across many industries. Amongst the several areas of impact, quarantine measures upended the way financial institutions—like banks and insurance companies—do business, forcing fintech institutions to embrace innovative business models to avoid being left behind or even having to shut down operations.
Regulatory authorities have applied a higher level of scrutiny over fintech companies in recent times, prompting those who operate in this innovative field to be more vigilant. As a result, a focus on compliance and regulations needs to be a core priority at the same level as product development, especially in the early stages.
Businesses engaging in activities involving virtual currencies are subject to a number of obligations by relevant US Federal authorities, including the Financial Crimes Enforcement Network (FinCEN) and the US Department of the Treasury (Treasury). These obligations include registration as a regulated entity, recordkeeping, reporting, and other anti-money laundering (AML) prescriptions set out by the Bank Secrecy Act and its associated implementing regulations (BSA).
The first part of this article series covered the basics of FinCEN cryptocurrency regulation and provided a deeper insight into four key considerations for money services businesses, especially in the field of FinTech. In this part, we take a closer look at one of the most important aspects of FinCEN regulation – the FinCEN Funds Transfer Rule.
