Why Crypto Investors Should Focus On Strong Compliance

Why Crypto Investors Should Focus On Strong Compliance

Cryptocurrency is an industry bursting with seemingly limitless possibility. Every day, startups are entering the scene with new and innovative ideas, products, and services. The possibility of building something unique, contributing to Satoshi’s vision, and perhaps even making a little history have come together to foster amazing growth within the cryptoverse (and in just a few short years, t’boot).

It should come as little surprise that investors have had their interests piqued by cryptocurrency and the various opportunities for engaging this burgeoning industry. After all, cool innovations attract cool investors. But how does an investor know what they’re getting into?

Let’s first be specific here that we’re referring to investing in a crypto entity, like an exchange, and not speculating on a bunch of new altcoins.

With that out of the way, assessing risk is key in any investment. Savvy investors know how to read market demands, project strategies, and make calculated decisions. The same holds true whether you’re selecting an option in a 401k or participating in an angel round with a promising cryptocurrency exchange.

One of the most important ways anyone can assess their risk and liability is by stringently researching the compliance of the underlying potential investment.

Without Compliance Comes Uncertainty

In its earliest days, many viewed cryptocurrency as the “Wild West” of markets. Regulators were forced to scramble, conducting research on the fly, while trying to apply existing rules and regulations to an innovation with no equal or peer within the world of traditional financial services.   


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Even from its earliest days, cryptocurrency has been subject to financial regulations which pre-date the technology from countries and international bodies across the globe. Initially, regulators were slow in bringing action against these newfangled “virtual currencies.”

But as the popularity (and market cap) of cryptocurrencies has grown, regulators have begun applying existing rules and regulations and, at times, imposing new laws and restrictions specifically targeting cryptocurrency.

These regulations, new and old, have brought with them heightened scrutiny for companies dealing in cryptocurrencies.

For investors with their finger on the pulse of regulatory compliance, this should be viewed as an opportunity, not a deterrent.

Assessing An Investment For Cryptocurrency Compliance

You could find a truly ingenious idea in a cryptocurrency-focused startup. The financials could check out. It could be supported by a solid team, a shining portfolio, and all the promise in the world.

But there’s a catch.

If they are not in compliance with cryptocurrency regulations, the entire operation – and all of its promise – can (and likely will) fold like a house of cards. Worse still, you could even end up liable as an officer of the company.

Bottom line, if you invest in a crypto venture that is not built around compliance, you have essentially bought …


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… a lemon. Like the photo above, your investment is going to sink. And just like buying a car before doing your due diligence, this lemon will break down on you, leave you stranded, cost you more in repairs, and eventually leave you on the side of the road with your thumb out.

Fortunately, this is something that can be avoided. It starts by asking the right questions.

How Does Compliance Affect My Investment In Cryptocurrency?

Complying with regulations is an ongoing process in any financial industry.

To maintain effective and reliable compliance, any organization in the cryptocurrency sector must do five things:

 

  • Identify the regulations the organization must satisfy.

 

  • Implement systems which promote best practices that comply with those regulations.

 

  • Regularly audit the organization’s ongoing ability to comply with regulations.

 

  • Quickly and efficiently resolve any compliance issues that may be identified.

 

  • Stay informed and up-to-date on changes to existing regulations or upcoming new regulations.

 

In a space changing as rapidly as cryptocurrency, neglecting any one of these five steps could be costly.

With new regulations being imposed regularly and concerns of ambiguity in existing regulatory policies, any organization hoping to work with cryptocurrencies must have well-versed and up-to-date compliance practices.

If you know how to properly evaluate compliance policies, procedures, and controls before investing, you’ll be able to spot many of these issues looming on the horizon before they have a chance to negatively impact your would-be investment.

How Closely Are YOU Looking At Compliance Prior To Investing?

For investors and entrepreneurs concerned with the big picture, details of compliance might seem like something that simply weighs them down or a “cost center.”

Personally, I hate hearing that pejorative reference to compliance. Yet lurking in these details could very well be the difference between a profitable investment and a complete waste of time.

Regulations are here to stay. Not only are they not going anywhere, but regulatory compliance expectations also have and continue to grow over time.

To Conclude: You Need To Regulate

As cryptocurrencies mature as a technology and become more widespread in their use, the regulatory spotlight will continue to shine brighter. Well-planned and properly implemented regulations and corresponding compliance best practices from industry are necessary protections for consumers engaged in the cryptocurrency space.


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It’s through adherence to these best practices and maintaining a high level of honesty that we can allow cryptocurrency endeavors to blossom into truly worthwhile and profitable investments.

Gone are the old days of the cryptocurrency “Wild West.” Today, those with a deep understanding of the industry, regulatory frameworks, and compliance expectations stand to do very well. An enterprise built on regulatory compliance is an enterprise that is built for the long haul. It’s one that is built to last.

Need help exploring this new world of possibilities? BitAML is here to help. Don’t hesitate to get in touch with our experts today. We’re excited to hear from you!



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