How and where to create compliant and regulated virtual currency exchange. Serhii Mokhniev, CAMS Regulatory Affairs Counsel CEX.

Transcription

1 How and where to create compliant and regulated virtual currency exchange Serhii Mokhniev, CAMS Regulatory Affairs Counsel CEX.IO LTD

2 So where should I go.

3 So where should I go. in 2018.

4

5 States Approach Breakdown Tailored statute Guidance Lack of position 11% 15% 74%

6

7 New York BitLicense Came into effect on August 8, 2015 Since then, only three BitLicenses were issued Key requirements: - Application fee; - Authorized minimal capital; - Books and records; - Reports and financial disclosures; - AML Program; - Cyber security program; - Consumer protection; - Complaints handling. "We drafted a detailed risk assessment of Bitstamp USA and the Bitstamp group overall, and more than 30 policies, training manuals and internal procedures guides that we believe are compliant with the New York regulatory regime... These included hundreds and hundreds of pages of plans covering every aspect of our intended operations. All of this internal scrutiny and drafting has made us a lot smarter company, albeit one with corporate tunnel syndrome. - George Frost, executive VP and chief legal officer at Bitstamp

8 New York BitLicense Came into effect on August 8, 2015 Since then, only three BitLicenses were issued Key requirements: - Application fee; - Authorized minimal capital; - Books and records; - Reports and financial disclosures; - AML Program; - Cyber security program; - Consumer protection; - Complaints handling. "We drafted a detailed risk assessment of Bitstamp USA and the Bitstamp group overall, and more than 30 policies, training manuals and internal procedures guides that we believe are compliant with the New York regulatory regime... These included hundreds and hundreds of pages of plans covering every aspect of our intended operations. All of this internal scrutiny and drafting has made us a lot smarter company, albeit one with corporate tunnel syndrome. - George Frost, executive VP and chief legal officer at Bitstamp, in August 2015 Till April 12, 2018 only three companies obtained BitLicense: Circle, Ripple and CoinBase

9

10 Estonia EU Member since 2004 Area 45,227 sq. km Population: ~1,318,000

11

12 Estonian virtual currency exchange license It is a simple authorization by and registration with Estonian Financial Intelligence Unit, likewise registration with FinCEN in the US. All you need is to pay a state fee and provide documents regarding rules of procedure and internal control rules, designate compliance officer, and perform other daily AML routine. - You DO not need to maintain authorized capital - You DO not need to pass fit-and-proper test - You DO not need to maintain certain level of cyber security - You DO not need to maintain any other things provided by licensing regime

13 Estonian virtual currency exchange license It is a simple authorization by and registration with Estonian Financial Intelligence Unit, likewise registration with FinCEN in the US. All you need is to pay a state fee and provide documents regarding rules of procedure and internal control rules, designate compliance officer, and perform other daily AML routine. Nevertheless you will need it if you are actually doing business from Estonia. - You DO not need to maintain authorized capital - You DO not need to pass fit-and-proper test - You DO not need to maintain certain level of cyber security - You DO not need to maintain any other things provided by licensing regime

14

15 Gibraltar British Overseas Territory Area 6,7 sq. km Population: ~32,000

16 New Gibraltar York DLT BitLicense Came into effect on January 1, 2018 License conditions are based on 9 principles: 1. A DLT provider must conduct its business with honesty and integrity. 2. A DLT provider must pay due regard to the interests and needs of each and all its customers. 3. A DLT provider must maintain adequate financial and non-financial resources. 4. A DLT provider must manage and control its business effectively, and conduct it with due skill and care. 5. A DLT provider must have effective arrangements in place for the protection of client assets and money. 6. A DLT provider must have effective corporate governance arrangements. 7. A DLT provider must ensure that all systems and security access protocols are maintained to appropriate high standards. 8. A DLT provider must have systems in place to prevent, detect and disclose financial crimes such as money laundering. 9. A DLT provider must be resilient and must develop contingency plans for the orderly and solvent wind down of its business.

17 Key Takeaways: - Currently only four jurisdictions provide licensing regime for virtual currency businesses: USA (New York), Japan, Gibraltar and Belarus - BitLicense is costly and cover very limited territory, however it is necessary to provide services to New York residents without regards to your actual place of business - Estonia provides not a licensure regime, but rather regulates virtual currency activity from AML perspective - Gibraltar offers licensing rules for virtual currency businesses but remains questionable due to offshore status

18 Thank you for your time! keep calm and choose jurisdiction wisely