How can compliance boost credibility in the crypto industry?

With the cryptocurrency industry experiencing a huge rise in popularity over the last couple of years, many in the industry are now viewing crypto on par with other established industries.

In a recent webinar by Clausematch – Women in Compliance: a fireside chat on compliance’s hottest topics – the company discussed with a range of speakers a number of hot-button topics in the industry, with the first focusing on how to tackle crypto regulations, featuring Mode group head of compliance of cryptocurrency FinTech Shelley Schachter-Cahm.

When quizzed on how compliance can help the crypto industry be seen with greater credibility by consumers, regulators and others, she quipped that ‘compliance is a hallmark of quality’. She said, “It (compliance) provides consumers with the confidence to build trust and allows organisations to demonstrate they are able to meet the standards expected from financial institutions. Compliance’s role is to help with the crypto evolution.”

One of the big topics relating to cryptocurrency right now is whether regulation is coming for the wider market. Schachter-Cahm believes that when it comes to regulations in crypto, there should be no surprises, as there is an ongoing consultation between industry and regulators. In addition, she foresees developments around the Travel Rule and the strengthening of AML protection.

She added, “There’s potential for some divergence in how countries can deal with each other, in particular with Brexit, i.e., between the Frankfurt and London financial hubs. Crypto-specific regulation should be underway, as the one-size-fits-all approach doesn’t seem to be delivering great results right now.”

In such a hectic and changing market, how can compliance professionals keep their head above the parapet? To Schachter-Cahm, a key coping mechanism should be to read a lot on the industry. Keeping an eye on LinkedIn developments, meeting other crypto professionals, joining WhatsApp groups and taking courses are all good routes to stay aware.

Those who are working in corporate should stay aware to not be caught off guard, Schachter-Cahm claims, as ‘there is just too much going on and it’s virtually impossible for a compliance officer to fully keep up and hold down a full-time job at the same time’.

While clearly an industry in the ascendant, cryptocurrency is fraught with risk and challenges. With this in mind, many crypto firms would be well placed to ensure they are remaining fully compliant and in-the-loop with industry developments.

Schachter-Cahm – who works for Mode – remarked the company is ensuring its safety by registering as a crypto asset company with the FCA, holding an EMI licence and being listed on the London Stock Exchange. This, she believes, means Mode have a ‘very firm and clear guidance on risk management and have it at their core’.

The crypto compliance exec also mentioned she believes the risks associated with crypto are the same as those associated with financial services and tech firms – surrounding areas such as IT and data security. More than that, however, these companies are invested in cutting the customer risk and are addressing that by having a very ‘vanilla’ risk profile for their customers to ensure they know who they are dealing with.

Schachter-Cahm explained that another key aspect in strengthening crypto compliance is educating customers about crypto as part of their customer journey. She remarked, “If we are not comfortable that our customers know what they’re doing, we wouldn’t possibly allow them to do it. That is why they have decided to adopt FCA’s financial promotion principles, that translate into clear, fair and not misleading communications. We got it right by mitigating risk in advance of being forced to do it. That’s how we’re mitigating risk.”

Clausematch and Schachter-Cahm concluded the conversation by discussing how to work with other internal teams to promote compliance and overcome its challenges. At the end of it, Schachter-Cahm claims, it is not about technical compliance, but boils down to communication.

She cited a quote from a book called How to Be a Wildly Effective Compliance Officer, which stated, “It is about communication, and it’s about humility and it’s about engaging with people who are nothing like you, probably, and accepting that you still need to make yourself understood, and that might be about educating you, not educating them.”

To view the chat click here.

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