A new regulatory evolution: Cryptocurrency and the securities industry at the crossroads

Abstract

With the global proliferation of virtual currency, regulators continue to analyse the market to determine the optimal framework for regulation. A key issue in this evolving regulatory environment is the outstanding question of how virtual currencies should be classified: as securities, commodities, assets or currency, and which government agency should regulate these products. This paper provides an overview of the current regulatory landscape and provide steps that firms and compliance professionals can take to minimise the potential anti-money laundering (AML) and sanctions risks of participating in the cryptocurrency market. Faced with an uncertain and rapidly changing regulatory landscape, this paper encourages cryptocurrency companies that engage in trading and exchange activity to consider implementing a risk-based compliance programme for addressing financial crime risk that is comparable to what a securities broker-dealer would have, considering the similarities they share with the securities industry.