How Today’s Crypto Organizations Can Fight Fraud & Stay Compliant

Unit21’s CEO and Co-Founder, Trisha Kothari, hosted a webinar titled, How Crypto Companies Fight Fraud & Stay Compliant in 2021. Joining her was BitPay’s General Counsel and Chief Compliance Officer, Eden Doniger, and Crypto.com’s Chief Compliance Officer, Antonio Alvarez.
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BitPay is the world's leading cryptocurrency payment processor, headquartered in Atlanta, Georgia. Crypto.com is a full-service consumer finance company that is looking to harvest the power and innovation of crypto to provide additional value to consumers around the world for their financial needs and to enable them to grow.

What follows is their 60-minute discussion in a Q&A format.

TRISHA
Unit 21’s position in the market has given us a unique perspective on the insanely fast-growing ecosystem of crypto, as well as the challenges and approaches that different organizations are facing. We're really excited to have this platform to exchange learnings and best practices.
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So, Antonio and Eden, what are the first things that a new crypto company should do from a risk and compliance standpoint, especially if they are not really aware of the risk and compliance operations needs in financial services?

ANTONIO
I would say that it is very important for them to understand the line between technology and financial services. They're getting into an industry that is rightly called FinTech, and they need to understand how much is Fin and how much is tech in the product. So it’s good to have a compliance officer or legal counsel in the initial design of the processes to understand what licenses they're going to need, what controls, policies or registrations from a regulatory perspective, and how can they tweak their product and their offerings to either lessen that burden or increase it, if they think that there is going to be value for them.
So they need to be very conscious of that, especially people who are coming in with great technology-based ideas, great ideas on how to build a platform. They need to understand that it's not just a platform and that just because they can program it doesn't mean that they can do it.

‍EDEN
One of the things that is most important is coming at it with a compliance-by-design mindset. As you're designing your products and services, compliance should be embedded into the design. The go-to-market (GTM) strategy will be a lot more successful, because most of the customers that you're probably going to want to interact with, depending on what kind of a crypto company you are, are actually going to really care about that in today's day and age.
Second, regulators are going to be much more confident in what you're offering if you can prove that you've done that. And third, and maybe most important, you will have a much better shot at avoiding some seriously bad moments down the road if you just invest in that mindset and the resources needed at the beginning. One of the pitfalls for companies is having a scrappy startup attitude as they get their company going, which is really common. So they might think we can't really prioritize and spend money on a Chief Compliance Officer or an outside counsel right now, so maybe another person can do compliance as their second job. Or can’t the CFO do compliance, after all, they are risk-oriented people? Or they hire new people who are completely inexperienced in compliance in the space. Those are common mistakes that a lot of new companies make and it comes to haunt them down the road.

‍ANTONIO
It’s amazing how in those situations they underestimate the requirement. You would never think of building a car without putting seatbelts in it or bumpers. So building a financial product without KYC or without the proper compliance controls is the same as a car without seatbelts.