Want to get into the Crypto Business? Consider this first.

An endemic volatility breeds growth in crypto. It presents enormous risk and reward in launching a new crypto business, be it ATMs, exchanges, or custodial services. As the crypto industry finds itself in the early majority phase of adoption, regulators worldwide are working on their crypto policies and guides. A new crypto business needs to keep this in mind and make compliance a priority for your operation. From our perspective at Blockchain Intelligence Group, here’s a list of priorities for any entrepreneur hoping to find success in a new crypto startup.

 

1. One of the first steps towards starting a sustainable and thereby compliant crypto business is to determine if your service falls under the category of money service business in the jurisdictions of operation. If so, the company should be registered under the relevant agency. For example, in the US, this would be FinCEN, and in Canada, it would be FINTRAC. Here’s a list of other regulatory bodies around the world.
2. Establishing AML procedures is paramount for crypto businesses to stay in business. For example, look at exchanges wrestling with alleged existential trouble. This would involve implementing a KYC process, screening transactions, and conducting a risk assessment for service users. Such measures would make it difficult for bad actors to use the service for money laundering. 
3. It is also critical to ensure that your crypto business does not deal with any entity that has sanctions enforced on it. Sanctioned entities have used cryptocurrency as a means to maneuver around sanctions, finance terror and human trafficking, and other nefarious activities. It is, therefore, necessary to screen transactions and users for sanctions violations constantly and consistently.
4. Crypto businesses should be vigilant while listing a cryptocurrency that may possess features of a security. For example, in the ongoing Ripple case, at least ten digital asset trading platforms came under unwanted scrutiny for listing and trading the currency in exchange for a fee without being registered with the SEC in any capacity. Here’s a framework from the SEC to help you determine if a cryptocurrency may be considered a security.

 

Keeping up with these and other compliance requirements can be difficult in a regulatory environment that is constantly evolving. 

 

1. To ensure that your business is fulfilling such requirements proactively, consider hiring a compliance officer that has sufficient knowledge of financial crimes laws and regulations, as well as laws relating to the nature of your service. A good compliance officer would ensure that the business is always thinking ahead of current and future regulatory requirements.

 

The cryptocurrency space is often described as the digital wild west. One reason for this is the number of hacks and scams that occur in the industry. Recently, a Turkish exchange suddenly went offline with its CEO missing in what looks like an exit scam. Therefore, after compliance, the next priority for a crypto business should be a commitment to security. Cryptocurrency & cybersecurity are inextricably linked. Here are a few fundamental steps a new business can take to implement proper security.

 

1. Storing most of the user information and funds offline, i.e.,in cold storage. This would mean that hackers wouldn’t be able to access this information and funds. It is also essential to keep cold storage devices safe from physical theft or damage. 
2. Having the platform audited by a trusted security audit firm. This would help in exposing and correcting any security vulnerability or errors in the code. 
3. In the event of a hack, ensure that there are systems to track down bad actors. Such systems are challenging to build from scratch; third-party products can be employed to do this.
4. A one-stop vault protection protocol allows the account holder to secure a wide range of cryptocurrencies against theft. In the event of an account breach or unexpected loss of an authority holder, such a solution from Brane Capital would have prevented the losses in Turkey.

 

Reliable security gives users the confidence that the platform is trustworthy; trust is tantamount to being in business. Therefore, new crypto businesses should demonstrably care about how their service is being used and how secure it is for users. This would help them cultivate a good relationship with regulators and build a solid user base that trusts their service.