how increased regulation could help businesses in the crypto sector prosper

by | Feb 18, 2019 | All Blog Posts, Featured

Cryptocurrencies have been a hot topic recently, with calls for increased dedicated anti-money laundering (AML) regulation dividing those within the industry.

Over the years, a degree of compliance regulation has been imposed across the crypto landscape, but this is still at a base level. Cryptocurrencies are, at present, not governed by one key authority. This means that transactions can’t be closely monitored and makes an ideal target for criminal activity.

The area gives a degree of anonymity to criminals, who often use it for illegal activities such as demanding ransom and money laundering, and this is what has led to the calls for a more streamlined, stronger approach.

With billions of pounds being laundered through cryptocurrencies in Europe and America last year, some believe the time has come for stringent regulations to be put in place to tackle the problem.

As these type of cases rise, the market itself has begun to suffer. With investors reluctant to plough money into the space, the valuation of cryptocurrencies has dropped by 75 per cent and many say that, for this to change and the industry to thrive, regulations must be put in place to deter cybercriminals from making their moves.

However, others argue that, given that anonymity has always been their main value proposition and at their very heart – something that is completely at odds with Know Your Customer (KYC) – regulation would go against all of the principles of the sector and stifle businesses operating within it.

There are many ways that increased regulation could help firms to prosper and provide new opportunities for them.

providing assurances about business processes

It should go without saying that legitimate firms will not want to be associated with unscrupulous business or procedures in any way. By installing and following stricter compliance measures and identity verification, businesses within the crypto sector can be sure that their activity is free of any illicit activity, particularly when it comes to money laundering, which is an issue that is more important now than ever before, thus allowing them to confidently work on improving operations and forging partnerships.

supporting growth

Engaging with the government and regulators in discussions surrounding regulations would allow crypto businesses to become a key part of the discussions and use their voices to shape the outcomes as regulations are drafted and brought into play. The result of this would be that these regulations support businesses and allow them to grow, which would have a positive impact on the sector as a whole.

improving reputation

Showing that its key players are adhering to extensive regulations can only benefit those within crypto industry when it comes to improving the reputation and upholding the integrity of the sector as those outside it would be working with the knowledge that activities are being strictly regulated and businesses have to answer to a firm set of rules that are in place to ensure procedures are above board.

As an article from Forbes mentions here, however well the crypto sector does:

…until financial institutions, marketplaces and governments have taken extensive and collaborative measures to tighten the reins and enforce stricter regulations in the crypto space, crypto currencies will continue to be tainted by illegal activity, leaving its market value vulnerable.

encouraging further investment

The introduction of wider and greater regulations would also change the landscape and make it more appealing to those considering future investment – something which is particularly crucial given the recent considerable drop in the market valuation of cryptocurriences.

TechNews discuss the benefits for potential investors here:

Dealing with fraud, money laundering or any other illegal activity can be an added headache for any company. Implementing compliance procedures can help develop a hassle-free process for companies.

the encompass view

There has been a great deal of debate over the need for enhanced regulation within the crypto sector for quite some time. Some are against its introduction as they believe the very fact that crypto was founded on anonymity means it would go against the principles of the industry, whereas there are those who believe regulation – if considered and implemented in the right way – would bring significant benefits to all concerned.

If the correct environment was established, there could be many advantages to businesses, such as regulation that supports (rather than stifles) growth of businesses, more scope to work and cooperate with mainstream financial services, and the chance to secure a wider customer base. This opportunity to work with a larger customer base would also ultimately impact on productivity and profitability, as well as the reputation of the sector and its key players.

By engaging with both the government and regulators, forward-thinking crypto businesses are ensuring they have influence and that their their voices heard as regulations are drafted, resulting in legislation that helps the industry – and those within it – to thrive.

In the world we operate within today, with the emphasis on combating financial crime, AML compliance and regulations have to be embraced. However, with the advanced technology solutions available in the market, this should be seen as a positive to companies and something that they can use to help them, rather than something that is avoided or seen as a drawback.

Maxwell Worrall | Business Development Manager, encompass

the encompass view

There has been a great deal of debate over the need for enhanced regulation within the crypto sector for quite some time. Some are against its introduction as they believe the very fact that crypto was founded on anonymity means it would go against the principles of the industry, whereas there are those who believe regulation – if considered and implemented in the right way – would bring significant benefits to all concerned.

If the correct environment was established, there could be many advantages to businesses, such as regulation that supports (rather than stifles) growth of businesses, more scope to work and cooperate with mainstream financial services, and the chance to secure a wider customer base. This opportunity to work with a larger customer base would also ultimately impact on productivity and profitability, as well as the reputation of the sector and its key players.

By engaging with both the government and regulators, forward-thinking crypto businesses are ensuring they have influence and that their their voices heard as regulations are drafted, resulting in legislation that helps the industry – and those within it – to thrive.

In the world we operate within today, with the emphasis on combating financial crime, AML compliance and regulations have to be embraced. However, with the advanced technology solutions available in the market, this should be seen as a positive to companies and something that they can use to help them, rather than something that is avoided or seen as a drawback.

Maxwell Worrall | Business Development Manager, encompass

about encompass

Founded in 2012 by entrepreneurs Roger Carson and Wayne Johnson, and operating from the UK, encompass is the creator of unique, innovative Know Your Customer (KYC) software for banking, finance, legal and accountancy that enable better, faster commercial decisions. The company is driven by the belief that the best decisions are made when people understand the full picture.

want to turn regulatory compliance
in to a competitive advantage?

Contact us today to arrange your personalised consultation of encompass. Discover how our KYC automation software can help your business accelerate onboarding and give you peace of mind that you are regulator ready.

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