Regulating cryptocurrencies is like a blockbuster script, says BitGo’s Horowitzitz
Crypto regulation is more of a dramatic movie scenario than the traditional boring and stagnant world of financial regulation.
The most obvious evidence is Binance’s current “hot water” situation, with regulators of the UK, Japan, Germany, etc. all putting the downside on the exchange.
In addition, the Financial Action Task Force (FATF), a global anti-money laundering (AML) watchdog, also studies the crypto industry year after year. But the field is evolving so fast that the FATF regulatory teams are scratching their heads and wondering how to deal with things like decentralized funding (DeFi).
Currently, the regulatory focus is mainly on third-party brokers, exchanges, trading desks and custodian banks. When it comes to the reach of Virtual Asset Service Providers (VASPs), Jeff Horowitz, Chief Compliance Officer at BitGo, a digital asset custodian, understands the regulatory burdens and knows where the shortcomings lie. Prior to joining BitGo in October, Horowitz had 2 years of experience as Chief Legal Officer at Coinbase, the now publicly traded exchange.
Jeff Horowitz – Legal Director at BitGo
When asked about Binance, Horowitz said that Binance.US – the branch of Binance’s business that serves US customers and complies with US regulations – made a “smart move” when he hired former US banking supervisor Brian Brooks Has. Brian Brooks was the former Chief Currency Controller for the US Office of the Comptroller of the Currency (OCC) and worked alongside Horowitz as Coinbase’s Chief Legal Officer.
“If there is someone who can balance management and business development, I think Brian is a good name. As far as I know, Binance.US and Binance.com are two very different companies. I think following the rules is the only way to go in the long run. “
Binance reportedly wanted to hire a former regulator or a government official like Brooks for their UK branch, but they were later beaten by the Financial Conduct Authority (FCA) with notices not to continue any regulated activities in the country. Plus, it also comes to the fact that a Binance-owned satellite company has worked hard here to become a regulated company. A Binance spokesman described the above situation as a “misunderstanding” with the FCA.
According to the Form S-1 Coinbase, which was filed on its IPO, alluded to Binance’s lack of compliance with regulations and potentially gave it an unfair competitive advantage. Horowitz says:
“Coinbase and other institutions have long made the decision to gamble for the long term and go the regulated route. There is a price to be paid for this. I don’t think anyone wants a distraction, but they want this to be a level playing field. That’s the only reason people don’t take the path of least resistance or go to a country where they can do things that are not possible elsewhere. “
While the rules are still half-baked, fighting regulated arbitrage is the challenge the FATF is grappling with. The FATF recommends companies like BitGo and Coinbase to share customer identification data along with cryptocurrency transactions for a certain amount known as the Travel Rule.
In addition to setting up a technical travel rule system that everyone is happy with, large companies have clear concerns about disclosing sensitive customer data to third parties. That has led to the piecemeal approach. In particular, companies in prudent jurisdictions such as the United States, Switzerland, and Singapore are introducing products for crypto companies registered in these regions.
With regard to these product categories, Horowitz is proud to have been the original initiator of the US Travel Rule Research Group (USTRWG), which he founded during his tenure at Coinbase.
“The reality is that many solutions are under construction and will have to be compatible with each other at some point. We are feeling regulatory pressure to start building. “
USTRWG has more than 30 members including core members like Coinbase, BitGo, Gemini, Fidelity Digital Assets, Paxos and Kraken. But that’s not to say that it is easy for these crypto competitors to sit down at the table to work together in good faith.
“I come from the traditional finance industry, where law and compliance work together and put the competition aside to find the right solution for the industry. And we only recently worked together. I’m pretty proud of that. “
At home at home
According to Coindesk