Tips for Navigating Cryptocurrency Regulations

🇪🇺 As we head to Brussels for Blockchain for Europe next week, I am focused on what is going on in the European Union. Great discussion with inspiring colleague Isabella Chase this morning and her briefing was on point! Last week, The European Banking Authority (EBA) issued guidelines to ensure consistent compliance with EU and national sanctions regimes, including measures targeting crypto-asset service providers (CASPs) and payment service providers (PSPs). These rules address the risks of crypto-assets, ensuring institutions can prevent misuse for sanctions evasion. TLDR . . . ✔️ Covers financial institutions, including CASPs and PSPs. Crypto-assets are flagged for risks tied to pseudonymity, global accessibility, and potential for evading sanctions. ✔️ Institutions must embed sanctions compliance into policies including assign senior management accountability for adherence, including crypto risks and regularly assess controls for gaps in handling sanctions exposure. ✔️ Institutions must assess risks specific to crypto-assets, focusing on high-risk clients, jurisdictions, counterparties, and tools like mixers or DeFi platforms obscuring transaction trails. Mitigation measures include advanced transaction monitoring and due diligence. ✔️ Calls for automated systems to screen crypto transactions for sanctioned entities or jurisdictions and monitor high-risk activities like peer-to-peer or unhosted wallet transactions. EBA encourages use of blockchain intelligence tools like TRM Labs for real-time detection of suspicious activity. ✔️ Emphasizes heightened scrutiny for crypto-related transactions especially for high-risk jurisdictions and understanding of the purpose and source of funds for transactions. EBA makes clear that counterparty checks are critical in peer-to-peer transactions. ✔️ Institutions must report breaches to authorities and establish processes for escalating suspicious crypto transactions. ✔️ EBA requires training on handling crypto-assets with blockchain-specific compliance skills. ✔️ Advises adoption of blockchain intelligence for monitoring and investigation; and, real-time systems for screening transactions against sanctions lists. ✨ Crypto-Specific Highlights ✔️ Recognizes CASPs as key players in sanctions enforcement, requiring stringent oversight. ✔️ Highlights risks of crypto-assets facilitating transactions with sanctioned entities. ✔️ Recommends institutions use blockchain intelligence like TRM to identify wallet ownership and track illicit activities. ✔️ Stresses tailoring controls to specific crypto-related risks. The guidelines seek harmonized compliance across the EU, addressing the misuse of crypto-assets for sanctions evasion. By integrating governance, technology, and training, the EBA ensures institutions are equipped to manage crypto-related risks while fostering transparency in a rapidly evolving financial landscape. What did I miss Isabella Chase?

Today at 4:00 PM, Paul Atkins will be sworn in as the new head of the SEC at a private event with the President. Atkins has spent much of his career arguing that markets thrive on rules that are simple, limited, and grounded in actual risk. In his confirmation hearing, he was blunt, arguing that vague guidelines are stifling good ideas and pushing talent offshore. He is correct and I've seen it first-hand. Regulations are necessary to protect users and to create a thriving competitive business environment, but finding the proper balance is critical. The early signs are promising. Several legacy enforcement actions have already been shelved, and Commissioner Hester Peirce’s newly empowered Crypto Task Force is drafting real rules before it reaches for subpoenas. That might sound procedural, but it’s exactly the kind of predictable framework the industry has begged for—and that overseas hubs like London and Singapore have been using to lure U.S. projects away. So where can the SEC (and, in some cases, the IRS) add the most value without smothering innovation? Here are a couple idea to start with: 1. Exempt small purchases—say, under $200—from capital‑gains reporting so crypto can finally function as a true medium of exchange. 2. Create a single federal stablecoin license with uniform reserve requirements. One rulebook beats fifty every time. 3. Give new networks a fixed window, preferrably two to three years, to decentralize before securities laws bite. Investors stay protected, builders get a chance to prove utility. 4. Spell out, in plain English, when a token is a security, a commodity, or a payments instrument. No more guessing games or surprise lawsuits. 5. Publish straightforward tax and securities guidance so node operators don’t feel compelled to move abroad. 6. Let broker‑dealers hold digital assets under a single national standard rather than navigating a maze of state money‑transmitter rules. 7. Accept smart‑contract data feeds as compliance reports. Why force innovators to upload PDFs when real‑time transparency is possible? None of this requires reinventing securities law, just extending common‑sense principles Atkins championed in the mid‑2000s. Nail these fundamentals and the next wave of tokenized treasuries, carbon credits, and real‑world‑asset exchanges will set up shop in New York, not Dubai. https://lnkd.in/gdU-_RnA

₿ Crypto in Your Corporate Treasury: Are you Ready? Lots of inbound questions on this topic! Here are the key items you need to address before executing the Crypto Treasury Strategy, which Eric Johnson and I discuss in more detail in the video: 1️⃣ Choose the Right Asset: Bitcoin’s scarcity makes it a strong store of value, while Ethereum offers utility for decentralized applications. Align with your financial objectives. 2️⃣ Secure Custody: Opt for third-party qualified custodians to mitigate risks. Ensure they have robust security, insurance, and regulatory compliance. 3️⃣ Accounting Clarity: With US GAAP ASU 2023-08, crypto is now valued at fair value. Implement strong reporting and SOX-compliant controls. 4️⃣ Tax Strategy: Use specific identification for tax events and consult experts to navigate IRS rules. Consider collateralizing crypto to minimize taxable events. 5️⃣ Regulatory Compliance: Adhere to AML/KYC and SEC disclosure requirements. Work with regulated counterparties and establish a clear crypto treasury policy. 6️⃣ Risk Management: Address volatility and counterparty risks with multi-signature wallets, due diligence, and hedging strategies. 7️⃣ Operational Integration: Align crypto with treasury goals, ensure liquidity, and leverage platforms for real-time visibility. Ready to explore crypto for your treasury? Reach out to me or Eric to discuss. #CorporateFinance #CryptoTreasury #Bitcoin #Ethereum