Crypto-finance firms have emerged to capitalize on the meteoric rise of digital assets as a means of payment. Some firms have even developed their own cryptocurrencies. These firms are operating in a legal gray area because cryptocurrency is not recognized as legal tender. However, the emergence of crypto-finance firms is a positive sign for the future of cryptocurrency adoption.
Crypto-finance firms help cryptocurrency users make financial transactions, such as buying cryptocurrencies or exchanging digital assets for real-world money. However, these firms often operate outside the scope of regulated financial institutions. The risks associated with these firms have lead the US Commodity Futures Trading Commission (CFTC) to warn investors about them.
Crypto-finance firms that sidestep AML regulations are referred to as Crypto Depository Institutions or Crypto Banks. The OCC has flagged the Crypto Banks as a category of financial institutions that pose risks to the stability of the financial system.
According to the Office of the Comptroller of the Currency (OCC), cryptocurrency lender Anchorage Digital Bank failed to follow anti-money laundering mandates (AML) and violated rules for monitoring suspicious activity.
Despite being granted a conditional charter in January 2021, the OCC said the flagship crypto bank failed to implement a compliance program that met Bank Secrecy Act and AML requirements. Also, there was no staff and no internal processes in place to verify customers under the bank’s compliance program. Anchorage Digital acknowledged the OCC’s findings but agreed to correct them.
After the OCC conditionally approved Anchorage’s charter, the crypto bank agreed to follow the OCC’s risk management rules and capital requirements. Federal charters preempt state regulations.
Nathan McCauley, CEO and board member of the startup, and Diogo Monica, president and board member, founded it in 2017, and it aims to facilitate and integrate secure digital asset buying and selling.
Anchorage has 15 days to appoint a compliance committee and submit a progress report and remediation plan as part of the OCC’s order. Anchorage has begun corrective action, and it is committed to remedy, according to the order.
Michael Hsu, Acting Comptroller of the Currency, said that the OCC holds banks to the same standards whether they engage in traditional or novel activities. “Whenever institutions fail to comply with federal laws and regulations, we will hold them accountable.”
A statement released by the Federal Deposit Insurance Corporation (FDIC) earlier this month requires that institutions under its supervision notify the agency before participating in any activity related to crypto assets. FDIC says that consumers should feel safe and secure about each crypto-related activity.
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Chris Munch is a professional cryptocurrency and blockchain writer with a background in software businesses, and has been involved in marketing within the cryptocurrency space. With a passion for innovation, Chris brings a unique and insightful perspective to the world of crypto and blockchain. Chris has a deep understanding of the economic, psychological, marketing and financial forces that drive the crypto market, and has made a number of accurate calls of major shifts in market trends. He is constantly researching and studying the latest trends and technologies, ensuring that he is always up-to-date on the latest developments in the industry. Chris’ writing is characterized by his ability to explain complex concepts in a clear and concise manner, making it accessible to a wide audience of readers.
