Compliance experts should help regulate crypto — Silk Road 2.0 founder

Rachel Wolfson10 hours agoCompliance experts should help regulate crypto — Silk Road 2.0 founderCompliance experts explain the importance of working with regulators to ensure that effective crypto laws are passed.1086 Total views19 Total sharesListen to article 0:00Follow upOwn this piece of crypto historyCollect this article as NFTCOINTELEGRAPH IN YOUR SOCIAL FEEDFollow ourSubscribe onCompliance may be key when it comes to ensuring reasonable crypto regulations are passed in the United States. 

As cryptocurrency adoption gains traction, US regulators seem to be tightening standards around crypto reporting requirements, trading rules and more.

Yet regulators may be targeting harsh restrictions on digital assets because they lack an understanding of cryptocurrency.Why compliance experts should work with regulators

Blake Benthall, founder of compliance startup Fathom(x), told Cointelegraph that companies specializing in crypto compliance can and should influence regulations in the US.

Benthall, who previously founded “Silk Road 2.0” — an illicit online marketplace for narcotics — was arrested in 2014 in San Francisco.Operator of Silk Road 2.0, Blake Benthall, arrested yesterday by FBI agents in San Francisco, CA— FBI New York (@NewYorkFBI) November 6, 2014

But instead of facing a lifetime prison sentence, the US Federal Bureau of Investigation (FBI) allowed Benthall to work with them to help crack illicit crypto cases.

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“During my time assisting the FBI, I learned that onchain data can often be misleading, as wallet addresses can be easily generated, complicating the identification of transaction participants,” Benthall said. “Unlike traditional finance, where account ownership is straightforward, crypto transactions can involve multiple and ambiguous owners, necessitating a nuanced approach to regulation.”

Benthall noted that crypto compliance firms know how to interpret complex onchain data accurately. Given this, he believes that experts in this field can work with regulators to ensure that rules are effective and realistic.

“These firms can educate regulators to prevent overly strict rules that don’t necessarily enhance security or protect privacy,” Benthall said.Crypto companies need to do more

Vincent D’Agostino, the former FBI agent who arrested Benthall in 2014 and later worked alongside him, told Cointelegraph that there is still regulatory confusionaround cryptocurrency.

He believes this is partly due to a lack of crypto companies taking action on the matter.

“Companies in this sector need to push regulators to better understand the space before passing arbitrary regulations that have the ultimate effect of suffocating a fast-growing industry,” D’Agostino said.

He added that while he was at the FBI, he noticed “a lot of well-meaning but highly misinformed individuals within all government organizations.”

D’Agostino said that many of his colleagues were interested in Bitcoin (BTC) yet may have been quick to label emerging technologies as “good” or “bad.”

“Once those tags are assigned, it becomes difficult to change perceptions,” he said.Crypto companies working with regulators on compliance

Although crypto companies still need to do more when it comes to compliance, some major players are taking action.

Melissa Strait, chief compliance officer at cryptocurrency exchange Coinbase, told Cointelegraph that Coinbase prioritizes compliance and strives to set industry standards for regulatory clarity around digital assets.

Strait said that Coinbase has worked with global law enforcement agencies for over a decade to provide resources and training to help prevent the illicit use of crypto.

“We have partnered with regulators to build a robust Anti-Money Laundering program, along with a Countering the Financing of Terrorism program,” Strait said.

In January, Coinbase urged the US Treasury Department to reconsider proposed reporting requirements for transactions involving crypto mixers. In October 2023, the Financial Crimes Enforcement Network proposed recordkeeping and reporting rules designating cryptocurrency mixing as an area of “primary money laundering concern.”

Binance also works closely with global regulators. Noah Perlman, Binance’s chief compliance officer, told Cointelegraph that Binance’s compliance team has been meeting in person with regulators worldwide to educate them about the industry. 

“These conversations are ongoing and critical,” Perlman said. “We are working to bridge the gap between crypto and traditional finance and helping to set new global compliance standards which can achieve greater protection for users.”

On Aug. 15, Binance’s website and Android and iOS apps were made available for crypto investors in India. Binance apps and its website were previously banned in India due to noncompliance with local regulations.Challenges may hamper innovation

While it’s notable that some crypto companies are working with regulators to help advance the industry, challenges remain.

According to Perlman, one of the biggest challenges working with regulators is dispelling antiquated expectations about the crypto industry.

“Binance and other reputable players are upholding and developing strong compliance programs comparable to mature, traditional financial institutions,” he said.

While this may be the case, Perlman noted that there is more work to be done. “The industry needs to listen to regulators’ concerns to ensure that we are meeting their expectations and growing responsibly,” he said.

D’Agostino further stated that cultural challenges may create setbacks.

“The people who get involved in crypto companies are often programmers, builders and people with idealistic aspirations,” he said. “These types of people can often lose sight of the complicated regulatory landscape in which they exist and end up making critical mistakes along the way.”

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D’Agostino added that it’s shockingly easy to create tools that could be used for money laundering.

“Crypto companies need to make sure they have a nice balance between the builders and those who have worked on the regulatory or enforcement side of things to make sure all angles are being considered,” he said.

In the meantime, a new bill has been introduced in the US to expand the Secret Service’s powers to combat cryptocurrency-related crime. Known as the “Combatting Money Laundering in Cyber Crime Act of 2024,” the bill aims to allow the Secret Service’s authority to investigate cryptocurrency transactions made by unlicensed money-transmitting businesses.# Silk Road# FBI# Law# Adoption# RegulationAdd reaction