The crypto asset ecosystem is perhaps the fastest growing industry to date. New projects are being released every day, each aiming to outperform previous solutions in some way, mixing technological and economic opportunities. Legislation is struggling to keep up with this volume, and by the time laws are drafted on a particular problem, the services have gone far beyond the subject in question. Cryptoassets are used in a multitude of cross-border transactions.
There are so many different and diverse use-cases that countries are looking for their own rules to protect their own citizens until the coherent MiCA regulation is implemented in Europe (previously discussed the topic here).
An additional 5 countries have recently conditioned the new ways in which their citizens can be provided with services. At the end of this article, we will reveal who these countries are and how we see the situation.
Who and what does legislation protect?
Protecting both consumers and service providers is important.
At Inlock, we are determined to follow the law, because it is not only a tool for success in business, but it also gives our clients a sense of purpose and confidence
But what does legal compliance mean?
In general, legal compliance means meeting rules, such as a regulation, policy, standard or law. The concept of compliance can also include efforts to ensure that corporations, firms and organisations comply with various industry standards
Legal compliance in business puts an additional burden on companies, partly due to the increasing number of regulations that require business leaders to be attentive to the full range of regulatory requirements. To meet compliance standards, an organisation must follow the requirements or specifications imposed by their rules or by legislation.
Organisations such as Inlock need to be aware of the regulatory requirements of the countries in which they operate. For example, the General Data Protection Regulation (the GDPR) applies not only to EU-based data collectors and data processors, but also to businesses established outside the EU that operate or provide services within the Union. Similarly the same US laws apply to European companies when they provide services in America.
Cryptoasset providers have been regulated by an increasing number of laws in the past few weeks.
Legal compliance versus corporate compliance
There are two main types of compliance, based on the origin of the framework: corporate compliance and legal or regulatory compliance. Both corporate and regulatory compliance consist of a framework of rules, regulations and practices to be followed.
● Corporate compliance refers to the rules, regulations and practices that an organisation puts in place to ensure compliance – both with external regulations and internal policies.
● Legal or regulatory compliance refers to the rules, regulations and practices that an organisation puts implements to comply with external regulations.
Corporate compliance and legal or regulatory compliance are very similar, the main difference is whether the policies are coming from internal or external regulations.
The evolution of crypto regulation
The matter of legal compliance is even more complex for centralised crypto businesses.
The rapid growth of the crypto sector in recent years is undeniable. The digital transformation of the private and public sectors, the multiplication of digital transactions and the rise in the price of bitcoin in April 2021 and October 2021 have steadily increased interest in this type of investment.
In 2021 alone, the number of global crypto holders almost tripled, increasing from 106 million to 295 million. Keeping up this growth rate, there will be more than 1 billion crypto users worldwide by the end of 2022. And the number of crypto platforms worldwide is already over 600.
In addition, this broader interest has also attracted the attention of European and local regulators, who have been making significant efforts to regulate the sector in recent years. As a result, crypto assets will no longer be pushed to the periphery of the financial system.
The Financial Action Task Force (FATF) is an inter-governmental policy-making body that aims to set international standards as well as to develop and promote policies to combat money laundering and terrorist financing at both national and international level.
The so-called FATF Recommendations are the international standards set by the FATF to combat money laundering, terrorist financing and more recently, weapons proliferation financing. The first FATF report on the risks associated with cryptocurrencies was published in 2014.
Many years and recommendations later, a robust framework is now in operation to guard over the illegal use of cryptocurrencies.
Also as a result of these recommendations, some European countries are applying stricter standards, ahead of the MiCA. For example, Germany, France, Italy, the Netherlands and Spain require crypto companies that offer virtual financial services in or from these countries to register.
In addition to the European and international anti-money laundering regulations already in effect, this puts an extra burden on the crypto platforms’ ecosystem, which is not cost- and business-friendly anyway. With legal compliance and the forthcoming EU-wide regulation (MiCA) in mind, Inlock has therefore decided that the integrity of the crypto market and strict compliance with the rules is a priority. Accordingly, registration for citizens of the countries mentionned above is suspended until the MiCA regulation comes into force.
Inlock is unconditionally committed to complying with the laws at all times as well as protecting the interests of our clients.