The Subtle Art of Crypto AML: Finding Balance

Alisa Tkach

Assisting businesses, protecting customers, and complying with the law.

Assisting businesses, protecting customers, and complying with the law.

Before 2017, when cryptocurrency hasn’t made its grand public appearance yet, only a small group of people were actively using it. Since the space was unregulated, the majority of exchanges and wallets were completely anonymous. An average cryptocurrency user wasn’t too thrilled about the necessity to pass KYC procedures and avoided dealing with platforms that asked for an ID.

Today, the scene changed drastically. Every business that handles crypto must follow AML policy. Anti Money Laundering (AML) policy is a global practice of preventing money laundering and other financial crimes. Because of that, you won’t be able to buy crypto without verifying your identity. 

From the consumer’s point of view, it might look unnecessary and annoying, but the struggle is real for crypto businesses. Not only do you need to meet the regulators’ requirements, but also make the procedure as smooth as possible for end-users. At Mercuryo, we’ve made finding this balance our priority.

Across the Jurisdictions

Mercuryo is a group of companies that operates in several jurisdictions: Estonian, British, Lithuanian, Canadian, and some others. With time, we plan on expanding our geography but currently focusing on these four locations. Ever since FATF published its recommendations for crypto-related activities, member countries have started issuing their own interpretations of the AML law. When reviewing specific AML requirements, one has to consider two things: where the company is registered and what service it provides

When talking about cryptocurrency regulations, AML law is the main regulatory instrument. So if your company provides services related to exchanging and storing digital currencies, you’ll have to deal with strict AML procedures. The reason behind these rigorous measures is crypto’s whirlwind past with anonymous wallets, privacy coins, darknet marketplaces, and money-laundering schemes. Today, the main goal of global authorities is to reduce to zero all the illegal activities.

In the EU area, FATF is the principal authority that issues regulations for cryptocurrency, audits new implementations, and gives feedback on what has been missed. In 2019, FATF obligated its 39 members to either ban virtual currencies or define and work out a set of straightforward rules on how to deal with them. Eventually, all the countries came up with their version of crypto laws.

Estonia was one of the crypto regulating pioneers and published its AML Bill as early as 2018. The bill required all the businesses dealing with virtual assets to: 

  • Be incorporated in Estonia
  • Have a physical office
  • Have 7,000 EUR authorized capital
  • Assign an AML officer 

However, each country is free to implement its own rules, and some jurisdictions offer lighter conditions than others.

Mercuryo, KYC, KYB, and Other Nuances

On top of that, the requirements for KYC and KYB (Know Your Business) are very different. Since we’ve got a crypto wallet for consumers and various business-oriented services such as widget or crypto acquiring, Mercuryo deals with both of these policies. 

Our crypto wallet users have to pass a standard KYC procedure. In most cases (however, it also depends on a particular jurisdiction), this means uploading an image of their ID and taking a selfie with the document. The verification process is carried out quickly and automatically, thanks to our partners at SumSub.

When dealing with business clients, we’re carefully checking the company’s profile and making sure their intentions to use cryptocurrency are clear. The process of evaluating the business is not always easy. You’ll have to check a lot of small details to the extent of the company’s directors, shareholders, as well as their closest relatives and whether they appear in any of the sanctions lists. 

Monitoring the regulatory agenda is a routine work of Mercuryo’s legal department. Even though most European authorities are consistent enough to send out updates and new requirements to enterprises working with crypto, we must always stay one step ahead. In a moment, everything can change, and we have to be prepared. Unfortunately, no unified position toward crypto-related businesses has been developed so far, and this is the main challenge Mercuryo has to keep terms with. 

Moreover, we’re continuously aiming to maintain the balance, streamlining processes for businesses and keeping up with legal requirements. As a matter of fact, these two are often interconnected. In Mercuryo, we are the firm believers that regulations are implemented for the sake of the crypto industry. With time, when the legal field becomes more or less unified, everyone, including governments, businesses, and end-users, will benefit from it. We’re not expecting a final draft any time soon, but it’s certainly coming. 

The Bottom Line

Digital assets have finally proved to be a progressive technology rather than shady darknet currency or a bubble. There is an undisguised demand for global cryptocurrency regulations policy, and undoubtedly, we’re moving in this direction. Eventually, our biggest expectation for this policy is to accommodate and protect the interests of businesses and users. 

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