Binance Fine Sets Grounds for Transformation in AML Compliance in Crypto Sphere

After the recent Binance admission of guilt in an anti-money laundering case, the crypto compliance expert anticipates a shift in the current compliance model from crypto platforms to users. The expert presents the new technology's role in preventing laundering in crypto entities and protocols.

December 4th, 2023. The former CEO of Binance Changpeng Zhao admitted guilty to anti-money laundering charges receiving a $50 million fine from the Justice Department, leading to his resignation and a $4.3 billion fine for one of the largest crypto exchanges.

Gintarė Košubienė, a compliance expert and co-founder of Anti-Money Laundering (AML) crypto compliance technology Micapass, highlights that this historically largest fine in the crypto world could accelerate the shift in AML compliance procedures moving them from platforms to the end users themselves.

"Currently, all Know Your Customer (KYC) procedures fall on the shoulders of exchanges and other virtual assets service platforms. This approach clashes with the decentralized essence of cryptocurrencies since users are hesitant to disclose their data," says Košubienė. "Shifting the responsibility to the end user's side can render KYC procedures to the more efficient process of money launderers prevention, enabling users to own their proof of not being in the sanctioned lists keeping private data off-chain. Also, it proves to be a more cost-effective approach for crypto businesses."

Micapass has been developing a technology that combines real-time wallet screening and KYC processes to prevent illicit assets from virtual asset service providers (VASPs) and decentralized finance (DeFi). This approach shifts the verification process to users, enabling them to privately verify their compliance with sanctions and keep personal data off-chain. Using a smart contract-based identity, Micapass users receive a status depending on their eligibility with sanctions, allowing platforms and protocols to conduct AML status checks without handling or storing personal information like it's done on conventional KYC models.

"Crypto entities developed in an unregulated market. Now it's changing and companies start facing consequences for failing to stop money laundering. This highlights the urgent need to change the approach to AML compliance, which is usually costly and pushes companies to take risks," says Gintarė Košubienė. "New innovative compliance providers are developing automated technologies that could help all the ecosystem players, including Binance, enter a more transparent crypto era and notice potentially illicit acts happening on their platforms faster with smart contract-based AML checks."

The government's actions show that the crypto compliance issue won't disappear from the future political agenda. The UK's Treasury office solidified regulations for the crypto industry, placing fiat-backed stablecoins under financial watchdog supervision and introducing a framework for other crypto activities. Meanwhile, the US Securities and Exchange Commission (SEC) emphasized regulatory compliance and integrity as a primary focus for its 2024 examination priorities, paralleling the European Parliament's steps to enforce current non-regulation financial services with Markets in Crypto-assets Regulation MiCAR by 2024's end.

"New technology for crypto compliance aligns with the governmental willingness to regulate the crypto sector, yet it enables the users to take responsibility to prove their eligibility within protocols. Smart contract-based identities are designed to help crypto players ensure their platforms are used only by good actors to make their AML practices less prone to mistakes and prevent potential penalties. In this case scenario, we won't need any third parties that would infringe the crypto users' right to data privacy," says Gintarė Košubienė.

Micapass
Giruliu g. 10-201, Vilnius LT-12112
Lithuania
htpps://micapass.com
+37062874164

Micapass is an on-chain AML compliance tool for the evolving crypto ecosystem. It provides an advanced AML wallet screening paired with continuous KYC/AML monitoring designed for DeFi, CeDeFi protocols, and VASPs. Its solution aids in identifying bad actors and preventing illicit funds from entering protocols.

This release was published on openPR.