Crypto compliance addresses risks in digital assets for exchanges, custodians and DeFi platforms. Taft navigates evolving standards such as FATF guidance and FinCEN rules, providing frameworks for token classification and custody.
Overview of regulations
Key rules include the FATF Travel Rule for transfers above the applicable threshold and SEC guidance on when a token is a security. In the European Union, MiCA sets the framework for stablecoins and crypto-asset service providers.
Core elements
- Token classification: apply the Howey test and equivalent analyses to determine security status.
- VASP registration: comply with licensing for virtual asset service providers.
- Custody and wallet security: multi-signature arrangements, segregation and insurance.
- Blockchain analytics: tools for tracing illicit flows.
| Element | Requirement | Regulation |
|---|---|---|
| Token classification | Security vs utility | SEC (Howey) |
| Travel Rule | Information sharing on transfers | FATF |
Step-by-step implementation
- Classify assets and register as needed.
- Integrate screening for wallets and transactions.
- Train on the risks of staking and other products.
- Conduct cross-border assessments.
- Audit for gaps against current requirements, including reporting for DeFi activity.
The challenge is regulatory change itself; the answer is a framework built to be adjusted rather than rebuilt.
Explore digital-asset strategy in Launch & Expand, or talk to an expert.
Questions
What is a VASP?
A Virtual Asset Service Provider, the FATF term for businesses that exchange, transfer, safeguard or issue virtual assets on behalf of others.
How do you comply for stablecoins?
Reserve audits, transparency about backing and redemption, and the licensing and AML obligations of the jurisdiction in which the coin is issued and offered.
Taft does not provide legal advice. Content is for informational purposes only and subject to regulatory guidance.