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What Is Cryptocurrency Compliance And Anti-Money Laundering?

Crypto compliance software tools are built to solve the main problem: chase cryptocurrency transactions, find origins of addresses.

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For the past decade, the cryptocurrency industry has emerged and expanded to significant levels. Cryptocurrencies are a completely new form of the digital asset. Governments of most countries are still debating on how to treat cryptocurrencies, while the financial industry has to act. Most conservative financial institutions try to ignore and refuse to work with crypto-related businesses. However, the cryptocurrency market is still expanding.

Such as the fiat world cannot be ignored and most crypto-related businesses still settle in traditional currency (like USD, EUR, GBP), it means that these crypto businesses have to comply with fiat world standards.

Recently, the topic of cryptocurrency compliance and AML is getting very hot, requirements are getting higher. Especially with the introduction of the 5th AML directive – the next edition of European AML regulations. It appears that most financial companies and even large banks have a good way to improve the way they analyse their clients and transactions.

As a result, we see a number of companies for the purpose of customer onboarding and monitoring are doing KYC, AML, PEP check, etc. But those service providers are more of an automation tool for compliance, not a breakthrough.

KYC AML CFT services are obligatory for all fintech businesses, but what about cryptocurrency and blockchain?

It is getting controlled as well.

Unlike traditional finance, you cannot identify if the cryptocurrency wallet address 100% belongs to a particular person. But such as the blockchain technology is an open ledger of all transactions, it means it can be tracked.

Here comes in the crypto compliance software. 

Crypto compliance software tools are built to solve the main problem: chase cryptocurrency transactions, find origins of addresses. One of the service providers that we at Wunderbit are working with is Scorechain. At Wunderbit we offer cryptocurrency trading, specifically to buy and sell bitcoin and other cryptocurrencies.

Scorechain is a compliance and AML tool for cryptocurrencies that provides a number of great tools. Specifically, for Bitcoin and Ethereum blockchains, Scorechain services include:

  • Transaction monitoring
  • History and transaction flows Clustering
  • Balance of addresses and clusters Origin of crypto funds
  • Risk management (unique Index computation)
  • Full customisation of parameters 
  • Alerts system
  • Export reports 
  • Real-time API

Case: cryptocurrency compliance and AML software have helped the FBI to track and chase a number of hacked and robbed cryptocurrency exchange. In some cases, it took 3 years to trace digital assets. But eventually, the hackers were chased and caught. 

Bitcoin transaction analysis allows you to see what is the origin of funds, see estimated risk score and transaction history. Data is presented in a very easy to understand way. Moreover, API is available. For example, it is possible to automate the validation of the bitcoin address, making the process of validation instant for the client.

Scorechain dashboard view.

Checking a bitcoin wallet address instantly gives you an overview of user behaviour. Most importantly a stream of bitcoin can be easily analysed and reveal suspicious transactions. Among sources in the sample picture above, you can observe red-coloured pie slices indicating high-risk bitcoin wallets associated with the examined bitcoin wallet address.

Who should businesses use crypto compliance software?

As mentioned above most regulated financial institutions will demand monitoring and control of their client’s operations. Thus, cryptocurrency businesses providing financial services that use the compliance software are a lot safer than those who don’t. For example, check of client cryptocurrency wallet addresses during the onboarding process allows to pass risk assessment of bitcoin transactions, then an instant report will suggest if the address was having any relationship with black markets, stolen cryptocurrency, gambling, etc. 

Serving an order partially related to money laundering or terrorist financing may result in significant problems to the business as a facilitator of criminal activity and even bank serving that crypto business. Thus, unsuccessful verification will not proceed and AML requirements and legal aspects are met.

Apart from that, crypto compliance software allows identifying the nature of the business activity of the client, making it transparent which may help in establishing trust with the clients

Source: https://wunderbit.co/en/blog/what-is-cryptocurrency-compliance-and-anti-money-laundering

Blockchain

Blockchain and crypto will challenge current finance, Nigeria VP says

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Nigeria’s vice president, Yemi Osinbajo, delivered a speech at an economic summit on Friday in which he spoke positively of crypto and blockchain. 

“There is no question that blockchain technology generally, and cryptocurrencies in particular, will in the coming years, challenge traditional banking, including reserve banking, in ways that we cannot yet imagine,” Osinbajo said on Friday during the Central Bank of Nigeria, or CBN, Bankers’ Committee Economic Summit. “We need to be prepared for that seismic shift, and it may come sooner than later,” he said.

The Nigerian vice president also noted the broadness of the crypto industry, mentioning decentralized finance, or DeFi, in the mix. “Decentralized finance, using smart contracts to create financial instruments, in place of central financial intermediaries, such as banks or brokerages, is set to challenge traditional finance,” he said. 

Osinbajo’s speech, which included a number of other points, is posted on his YouTube channel. The Nigerian vice president also tweeted out a video clip highlighting of some of his crypto comments from his talk.

“The point I’m making, is that some of the exciting developments we see call for prudence and care in adopting them and these have been very well-articulated by our regulatory authorities,” he said, adding:

“But we must act with knowledge and not with fear. We must ensure that we are in a position to benefit and in a position to prevent any of the adverse side effects, or any of the possible, even criminal, acts that may arise in consequence of adopting or taking any of these options.”

The comments come in contrast to recent developments in Nigeria. Earlier in February, Nigeria forbade banking interactions with crypto exchanges, as per a ruling from its central bank. The CBN’s governor also called crypto assets illegitimate. Bitcoin recently traded at a significant premium in the region.

Source: https://cointelegraph.com/news/blockchain-and-crypto-will-challenge-current-finance-nigeria-vp-says

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‘Bitcoin could reach $1 million or $1, and may do both of those’

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While many analysts predict that either Bitcoin could increase to a million or fall to a dollar, a popular businessman and investor based in the US thinks that the asset could do both!

In a recent interview with Joe Kernen at CNBC’s Squawk Box, Internet analyst Henry Blodget of the dot com era fame said: 

Bitcoin could go to $1 million… it could also go to $1. And in fact it may do both of those

In addition, Blodget, who also served as the head of the global Internet research team at Merrill Lynch, is unconvinced about the asset’s value proposition. He claimed that Bitcoin as an inflationary hedge and the narrative surrounding its value as ‘digital gold’ were “stories”. He further added: 

But the stories that we tell about why relative to the value of gold or other currencies, they’re ludicrous.

In his opinion, Bitcoin can trade just about anywhere because it does not have any fundamental backing. He said that unlike traditional stocks, “which usually does have some relationship ultimately to a fundamental,” of a company, “Bitcoin doesn’t, so that means it can trade anywhere.”

The entrepreneur thinks that crypto exchange Gemini’s CEO Tyler Winklevoss could eventually be “exactly right,” in his forecast that the asset could surge to a million. However, Blodget said:

If people were to decide that for the next couple of hundred years Bitcoin is where you park your money when you take it out of the fiat system, OK, it’s possible.

Interestingly, while crypto Twitter and Bitcoin enthusiasts, in particular, called out the analyst’s criticism, they commended the interviewer’s counter-argument. CNBC’s Joe Kernen seemed to even “speak the language” of the crypto space as one twitter user named @HodlBells noted:  


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Source: https://ambcrypto.com/bitcoin-could-reach-1-million-or-1-and-may-do-both-of-those

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Crypto platform NetCents to offer users access to DeFi protocols thru Vesto

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NetCents, a cryptocurrency payments company, today announced it has signed an agreement with Vesto.io to pave the way for DeFi access in the NetCents platform.

Vesto, is a San Francisco-based company that has created a platform allowing users to choose from multiple DeFi protocols in a virtual supermarket. NetCents (with regulatory approval) intends on enabling a portal to the Vesto infrastructure from the NetCents wallet in order to facilitate user’s adoption of DeFi investing in an efficient and easy-to-understand interface.

“We have seen the DeFi space explode over the past year, but for it to reach the next level – the tools and the process has to be attainable by the novice crypto investor. We will be adding a layer of simplification to the process so that individuals can have their savings actually working for them without the complexity of the current platforms. Individuals have the right to lend their money at market-based rates instead of getting 1% interest on their savings that the commercial banks are offering.”
– Clayton Moore, NetCents Founder & CEO

LOI

The Letter of Intent  (LOI) contemplates a Joint Venture between parties and an option for NetCents to invest in Vesto and hold a significant ownership stake in the company at a future date.

Management of NetCents also informed investors that many of the concepts embraced by these DeFi platforms have not been vetted by the many authorities that regulate financial products. NetCents intends to work together with regulators to navigate this landscape and resolve it with a compliant product.

For Example: Fintech businesses seeking to bring a novel product or service to the market can seek regulatory relief through regulatory sandboxes such as the Ontario Securities Commission’s LaunchPad or the British Columbia Securities Commission’s SandBox.

Furthermore, businesses that distribute, trade, or advise in crypto assets that are securities are required to comply with securities laws (in particular, registration and prospectus requirements), which can be onerous. There are many exemptions for specific types of distributions, trades, and other activities and NetCents intends to research these exemptions rigorously. These exemptions, at a high level, may limit the types of investors that can participate or the investment amounts, or may require the preparation of disclosures to investors and filing of a disclosure document.

Source: https://www.cryptoninjas.net/2021/02/27/crypto-platform-netcents-to-offer-users-access-to-defi-protocols-thru-vesto/

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