Between Binance and FATF, more attention turns to crypto compliance: BitGos Horowitz

[ad_1]

Cryptocurrency regulation is more like a movie script than the traditionally boring and burdensome world of financial regulation.

Just look at the hot water Binance seems to be in now, with regulators in the UK, Japan and Germany to name a few, calling for fault against the exchange.

More broadly, the Financial Action Task Force (FATF), a global anti-money laundering watchdog (AML), annually reviews the crypto industry. But the industry is changing so fast that FATF policy teams are wondering how to handle things like decentralized finance (DeFi).

Related: State of the Crypto: Binance is Firmly in the Crosshairs of Regulation

For now, the regulatory focus is mostly directed at third-party crypto intermediaries, exchanges, trading bureaus, and custodians. When it comes to this area of ​​Virtual Asset Service Providers (VASPs), Jeff Horowitz, Chief Compliance Officer at BitGo, a digital asset custodian, understands where the regulatory tensions and loopholes lie. Prior to joining BitGo in October, Horowitz spent two years leading compliance efforts at Coinbase, the now publicly traded crypto exchange.

Asked about his opinion on Binance, Horowitz said that Binance.US – the branch of the Binance business serving US customers and complying with US regulations – made a “smart move” by hiring the former US banking supervisor. Brian Brooks. (Brooks was previously the Acting Comptroller of the Currency in the United States, and before that, he worked alongside Horowitz as the Legal Director of Coinbase.)

“If there’s someone who can balance being regulated and growing a business, I think Brian will be able to be successful,” Horowitz said in an interview. “From what I know, Binance.US and Binance.com are two very different companies. I think adopting the regulations is the only way to go in the long term. “

Binance is reportedly looking to hire a former regulator or government figure like Brooks for the UK, where a Binance-owned satellite company attempted to be regulated but was later slapped by the Financial Conduct Authority (FCA). A Binance spokesperson called the situation a “misunderstanding” with the FCA.

The story continues

Related: Binance Suspends Pound Sterling Withdrawals Again: Report

Coinbase, in the Form S-1 it filed during its IPO, mentioned Binance’s lack of regulatory compliance as potentially giving it an unfair competitive advantage.

“It’s been a long time since Coinbase and other entities made the decision to play the long game and go the regulated route. And it comes at a cost, ”Horowitz said, adding:

“I don’t think anyone wants to change direction there, but they want it to be a level playing field. I think that’s the only way people don’t run down the path of least resistance or find the only country where they can do things that you can’t do in other spaces.

Have rules, will travel

Preventing regulatory arbitrage, when the rules are still only half-cooked, is the challenge taken up by the FATF, which has recommended that companies like BitGo and Coinbase share customer credentials as well as crypto transactions. -currency over a certain amount, known colloquially as the “rule of the journey”.

Besides designing a technical travel rules system that everyone is happy with, there is a clear concern among large established companies when it comes to sharing sensitive customer information with lesser-known third parties. This has led to a piecemeal approach, where companies in smaller jurisdictions like the United States, Switzerland, and Singapore are rolling out products for crypto companies registered in those regions.

When it comes to these types of products, Horowitz is proud to have been the initial driving force behind the United States Travel Rules Working Group (USTRWG), which he created when he was at Coinbase.

“The reality is that there are multiple solutions being built and at some point they will have to be interoperable. But we felt the regulatory pressure to start building, ”he said.

The USTRWG, which has over 30 members, includes a core made up of companies such as Coinbase, BitGo, Gemini, Fidelity Digital Assets, Paxos and Kraken. It is therefore no small task to have these crypto competitors collaborate with their bare hands.

“I come from traditional finance, where legal and compliance would work together and set aside the competition for the right thing for the industry,” Horowitz said. “And we just got together, and I’m pretty proud of it.”

Related stories

[ad_2]