Crypto regulatory wargames

Behold the Regulation

First, the Financial Crimes Enforcement Agency (FinCEN) issued a notice of proposed rule making today called, “Requirements for Certain Transactions Involving Convertible Virtual Currency or Digital Assets”. The short of it is that crypto wallets holding digital assets would need to KYC into the banking system in order to convert decentralized assets into centralized ones. If you have a “permissionless” account, such as a MetaMask address on Ethereum which you funded with some money from Coinbase, new obligations are created around record keeping for transactions over a certain size ($10,000 in a connected series) for the companies enabling those transactions.

Behold the Response

It was nice of the OCC to clear up that all banks are crypto custodians. It was also nice of a whole bunch of banks, including BBVA, to become crypto custodians. Another example is Standard Chartered and Northern Trust partnering on a platfrom called Zodia. We expect that this is years of work, starting in 2017, coming to fruition. These players are leveraging their existing position to notch market share in the new world, where they are starting from scratch. They had to measure the jump very carefully to not sabotage the existing incumbency, both reputationally and from an investment perspective.

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Lex Sokolin

Entrepreneur building next-gen financial services @Consensys @Autonofintech @Advisorengine, JD/MBA @columbia_biz, editor and artist @inkbrick