In recent years, the cryptocurrency landscape expanded rapidly and the regulations to govern this environment have also evolved exponentially. Advances in technology has paved the way for payments and other financial services to become very cost effective, accessible, and to simplify cross-border transactions.

A popular topic of discussion

This has resulted in crypto assets and their capabilities becoming a very popular topic of discussion in boardrooms. Many of these discussions also include the regulatory requirements for crypto asset firms wanting to operate in different countries and how these regulations vary.

Lysis Group has been, and continues to be, successful in assisting clients with complex and contentious regulatory aspects regarding crypto registration. We have significant expertise in the crypto asset space and can provide substantial insight into this very dynamic market.

Specifically, we provide guidance and practical assistance to ensure that your firm’s preparations for the crypto application meets the regulator’s standards to ensure a successful registration. This includes:

• A detailed review of the requirements and expectations.
• The management of the application process from requirements to submission; and
• To review and, if necessary, redraft documents to ensure that all the regulator’s requirements and expectations are met.
• Help to manage the responses and inquiries from the regulator during their review of the registration application.

The regulatory landscape

Since Ireland is one of 27 countries that form part of the European Union (EU), their crypto directive and regulatory requirements will be subject to that of the EU. In broad terms, the EU considers crypto assets to be legal, but exchange regulations are different in member states.

During January 2020, the EU’s Fifth Anti-Money Laundering Directive (5AMLD) categorised cryptocurrency and fiat exchanges under their anti-money laundering legislation. This required exchanges to perform thorough Know Your Client (KYC) and Customer Due Diligence (CDD) checks on customers in line with standard reporting requirements. In December of that same year, the EU’s Sixth Anti-Money Laundering Directive (6AMLD) was introduced which made crypto asset compliance even more stringent by adding cybercrime to the long list of basic money laundering crimes.

This was followed by the EU publishing a set of legislative proposals during 2021 which contains consequences for virtual asset service providers (VASP). According to these proposals, Transfer of Fund Regulations (TFR) (aka ‘The Travel Rule’ and pursuant to FATF recommendations) will extend to include all VASPs in the EU. In short, the Travel Rule requires VASPs and other financial institutions, to share relevant originator and beneficiary information alongside virtual asset transactions, therefore hampering criminal and terrorist activities.

The Criminal Justice (Money Laundering and Terrorist Financing) (Amendment) Act 2021 came into force on 23 April 2021 in Ireland. The Irish Act fully implemented 5AMLD and this brought VASPs within the scope of existing AML legislation.

Following a successful registration, Lysis can further support your firm to operate in a regulated market. This includes the design, development, implementation, and enhancement of an effective and robust Financial Crime framework, meeting regulator’s requirements and expectations.

A robust financial crime framework

Once a crypto asset firm has obtained full registration to operate in a country, is when it faces the real challenges i.e., to develop, maintain and operate a robust financial crime framework and demonstrate that effective controls are in place.

This can be a very costly and challenging process that is often overlooked and underestimated. Additionally, it is likely that the regulators will intensify scrutiny to ensure that all the newly registered crypto asset firms are aligned with AML regulations and operate with appropriate controls to fully protect their bottom line and their clients.

To navigate through the various regulatory requirements from different countries to register a crypto asset firm, seems to be an impossible task, especially when a firm has global reach.

Having vast experience, Lysis Group believes that a successful registration requires careful planning and preparation so that the documentation submitted for review is fit for purpose and responds correctly to the test questions. In addition, the application must be prepared to provide the regulator with clarity on the business purpose and activities and demonstrate a good understanding of the risks and effectiveness of controls.

To date, we have assisted several crypto asset firms with the required registration processes in various countries including assisting one of the first crypto asset firms to be registered in the UK. As crypto registration experts, we will assist your firm in achieving full registration in a cost-effective manner within various jurisdictions, if needed, and give you the peace of mind in knowing that your firm can safely operate in a regulated market.