20/09/2023 Alexander

How to approach compliance and AML in DeFi and tokens

Andrew Kimbrough worked in Risk and Compliance in traditional finance before switching over to digital assets. Today, the regulatory framework in the digital assets space has a micro focus on AML, sometimes at the expense of other compliance aspects like market conduct and corporate governance. When asked about the main current compliance challenge in DeFi, Andrew shares that KYC is something that still has to be worked on. Andrew believes that traditional finance is going to have to merge with digital assets and claims that the regulators are pushing financial institutions including DeFi to know their risks. AML is a challenge in DeFi because a customer can be transacting with bad actors in various liquidity pool.

In DeFi, there is no counterparty risk but there is a technology risk but this can be managed.

In Switzerland, there are definitions for security tokens, payment tokens and utility tokens. Your classification determines your license and regime, so there is clarity. In the US, everything but Bitcoin is a security, which poses a risk to the DeFi community.