Welcome to Watch This Space, a new way for me to deliver K2 Integrity’s high-level expertise and share meaningful perspectives in the marketplace with you. Twice a month, I will highlight a few recent assignments which, I believe, will help reveal emerging risks, trends, technologies and anything our team thinks is important for you to know.
There’s a famous quote from someone (ok, it was Lenin) that sums up this last year: “There are decades when nothing happens, and there are weeks when decades happen.”
In the last 12 months, our firm, like yours, has had decades happen. We faced a Niagara Falls–sized deluge of change virtually overnight. And as the world shut down, we went into overdrive, identifying and building solutions to get our clients through this period of such unprecedented chaos. Now, with shots in arms underway and normalcy on the horizon, we are ready to address what’s going to happen in the weeks (aka decades) and months to come.
With this in mind, I want to focus this first installment of WTS on the explosion of virtual currency and assets and how K2 Integrity has been addressing the unique set of challenges. One thing is clear: Digital currency is here to stay. What started as the shady work of a small cadre of anonymous hackers, technologists is now a mainstream industry valued at more than $1 trillion. Payment companies, asset management funds, art auction houses, financial institutions, luxury products and industrial companies are trading, investing, issuing, and shifting cash into cryptocurrency. But with this extreme growth comes responsibility.
Treasury Secretary Janet Yellen recently stated that she “sees the promise of the new currencies, but also sees the reality: Cryptocurrencies have been used to launder the profits of online drug traffickers; they’ve been a tool to finance terrorism.”
Clearly, regulatory scrutiny has never been more necessary. But the crypto markets have outpaced government’s ability to keep up with establishing the necessary regulatory controls and protocols. We are now on the cusp of what will soon be a wave of new guidelines for the industry. New entrants, their founders and investors understand that Regulatory Risk Management is proven to be a competitive advantage—speed to market and its sustainability are everything in this space.
K2 Integrity has been actively designing and implementing compliance solutions around the globe for over six years, including helping two of the largest crypto exchanges launch best-in-class compliance programs that enabled them to receive their trust and/or bit licenses. High-level summaries of some of our recent assignments are below:
An Asia-based provider of bitcoin-related offerings hired us to build a full compliance framework that would allow it to meet regulatory standards and operate as a full-fledged European banking institution.
A UK-based issuer of cryptocurrency, seeking to achieve licensure from the Financial Conduct Authority as its business expands, hired a K2 Integrity expert to serve as its interim Money Laundering Reporting Officer to help manage growth.
A virtual currency exchange in the Midwest needed us to establish policies, procedures, and a governance framework to comply with the new compliance requirements for Virtual Asset Service Providers, including the FATF Travel Rule, and regulatory requirements and record-keeping for transactions involving un-hosted wallets.
Given the magnitude of its influence, I’m sure we’ll be revisiting the virtual currency, payments and assets space in the weeks and months to come. For now, I’d love to hear your feedback—including suggestions of new topics you’d like to see covered in WTS—and I’m always available for any kind of conversation. Please don’t hesitate to reach me directly at [email protected] or connect with me on LinkedIn.
Thank you for your confidence in K2 Integrity to act with the utmost discretion, professionalism, and attention to detail. I truly appreciate our partnership during this extraordinary time—please continue to stay safe.
All my best,