What Are the Main Crypto Conclusions of 2019

At the beginning of this year, I predicted 3 major themes in cryptocurrency for 2019: Cryptocurrency would be embraced as “regtech” by financial institutions and regulators, it would play a vital role in sanctions enforcement, and Anti-Money Laundering practices (AML) would strengthen in Asia.

As it turns out, 2019 was an important year for cryptocurrency in terms of regulations, but more in terms of clarity provided by the Financial Action Task Force (FATF) and FinCEN, than automating banks’ compliance programs and regulatory oversight. Notably, for the first time, FinCEN explicitly states blockchain analysis is an important part of an effective AML solution and a significant factor in cryptocurrency businesses’ ability to comply with the Bank Secrecy Act (BSA). FinCEN makes it clear that Know Your Customer (KYC) processes are also important, and cryptocurrency businesses should expect tough regulatory scrutiny on that as well next year.

We also saw further regulatory clarity from the SEC. For example, the Blockstack Reg A approval was the first approval of its kind and demonstrates a path to SEC-approved IPO-type fundraising with a crypto token. While other firms have previously taken advantage of Regulation A , this is the first time that investors will receive a token rather than shares in the company. 

Now that we have the regulatory clarity, I think 2020 will be an important year for embracing cryptocurrency as regtech.

Cryptocurrency did indeed continue to become important to sanctions enforcement, most notably related to fentanyl trafficking. I expect this trend to continue.

While our business expanded in Asia and Anti-Money Laundering practices there are strengthening, we still see the laundering of large amounts of illicit funds through some OTC brokers operating out of China. Funds stolen through the PlusToken scam is a good example of this.

One notable milestone that I didn’t predict was major law enforcement announcements…

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