Smart contracts and other related topics, such as proof-of-stake, have begun to raise several new questions about how to understand and address compliance. They represent an important frontier for blockchain innovation.
Rapid growth in crypto innovation and adoption is leading regulators to seek to close regulatory loopholes in the industry. Striking a balance between protecting the public good and managing innovation risks will help create a foundation for greater reliability and further growth. Regulation that limits money laundering and financial crime is an essential piece of the puzzle.
Legal and Compliance functions can at first glance seem to be closely intertwined for an outside observer. Indeed, both broadly deal with regulations and the impact of breaking them. However, the similarity falls short of the specific roles of legal and compliance and their related tasks. In fact, these roles work best when entrusted to separate experts. While combining these roles might seem appealing, especially for early-stage startups, there are conceptual differences to consider beforehand.
The FATF travel rule, also known as “FATF Recommendation 16,” is a common topic for crypto businesses who want to understand their compliance obligations with respect to Anti-Money Laundering (AML) and Know Your Customer/Customer Due Diligence (KYC/CDD). Yet, many in the industry have misconceptions about the recommendation, its impact, and its potential compliance implications.
While the GLBA Privacy Rule places its focus primarily on notice and disclosure, the GLBA Safeguards Rule focuses instead on how NPI is protected. It mandates that financial institutions develop an information security plan in writing that describes all of the procedures and processes seeking to protect client NPI.
