Crypto and compliance

Legislation plays a crucial role in structuring society and safeguarding its members. As new financial instruments like cryptocurrency emerge, regulatory frameworks must adapt to maintain order, protect consumers, and prevent harm.

Understanding an organisation's DNA is essential for shaping its risk and compliance approach. Different types of entities are active in this space, including Crypto Asset Service Providers (CASPs), Financial Service Providers (FSPs), and even everyday users of crypto. Each category has distinct compliance needs, and recognising these differences is the first step toward building effective frameworks. 

In light of the growing complexity, FAnews spoke to Rianné Potgieter, CEO of the Compliance Institute Southern Africa and Chair, International Federation of Compliance Associations (IFCA), to unpack the most pressing compliance challenges facing the crypto sector today. 

Compliance and risk frameworks: traditional vs. digital

Potgieter highlighted that while certain key aspects such as KYC and the techniques used remain the same, there were also key differences between traditional financial services compliance and compliance in the world of digital assets, as outlined below: 

 Crypto compliance challenges

When asked about the most common hurdles crypto businesses face when implementing compliance measures, Potgieter points to regulatory uncertainty as a primary challenge. 

“Many companies struggle to understand what is required of them because the regulatory environment is constantly evolving,” she says. “This uncertainty makes it difficult to design and implement compliance programmes that are both robust and adaptable.” 

Key risk factors for crypto businesses

When designing compliance and risk management frameworks, crypto businesses must prioritise:

Anti-money laundering (AML) and combating the financing of terrorism (CFT) protocols.

• Cybersecurity measures to protect client assets and information.
• Due diligence on counterparties and service providers.
• Transparency in operations, including clear disclosures to customers.
• Regular training and upskilling for employees on compliance and crypto developments. 

Identifying red flags 

When it comes to detecting compliance risks early, Potgieter points out several red flags companies should watch for: 

• Inconsistent transaction patterns
• Clients who resist providing KYC information
• Use of privacy coins or mixers without clear justification
• Rapid movement of funds across borders
• Weak cybersecurity controls 

“These indicators often suggest underlying compliance issues that need to be addressed immediately,” she warns. 

Balancing compliance with reputational risk

Balancing regulatory compliance with reputational risk is a delicate act, particularly given the uneven pace of regulatory development globally. “Businesses must focus on ethical leadership and governance,” Potgieter advises. “Even if regulations are unclear in a jurisdiction, companies should still operate according to best practices and their own policies and values.” 

This means developing internal standards that may exceed minimum regulatory requirements. In doing so, businesses not only protect their reputation but also position themselves as leaders in a rapidly maturing industry. 

“Building trust with customers, regulators, and other stakeholders is paramount,” she adds. “It is better to be seen as overly cautious than to be caught unprepared.” 

Preparing for shifting regulatory requirements

“Crypto businesses must anticipate change, not merely react to it,” Potgieter advises. 

Steps companies should take include: 

• Engaging with industry bodies and regulators early in the policy development process.
• Building adaptable compliance frameworks that can accommodate new regulations.
• Monitoring regulatory developments locally and internationally.
• Documenting compliance efforts thoroughly to demonstrate good faith engagement.
• Investing in continuous education and ongoing regulatory scanning to stay ahead.
• Adopting suitable technology such as Chainalysis and TRM for blockchain analytics and transaction tracing to detect illicit activities. 

“Establishing a strong culture of compliance within the organisation is crucial,” Potgieter emphasises. “It must be integrated into the strategic objectives of the company.” 

Future-proofing compliance means fostering a culture of continuous improvement and regulatory awareness across all business functions. 

Warning indicators in compliance

Potgieter identifies several warning signs when assessing crypto companies' compliance practices: 

• Lack of clear accountability for compliance matters within leadership.
• Insufficient documentation of policies and procedures.
• Minimal or no independent audits or external reviews.
• Over-reliance on third parties without conducting due diligence.
• Gaps between stated compliance policies and actual business practices. 

Navigating the global crypto compliance challenge

Given the global nature of cryptocurrency, businesses must recognise that compliance cannot be confined to domestic regulations alone. Cross-border transactions, multinational customer bases, and differing jurisdictional expectations all add layers of complexity. 

“It's about building a compliance mindset that is both agile and principled,” concludes Potgieter. “Successful crypto businesses will be those that embed compliance into their core operations, not as an afterthought, but as a strategic asset.” 

Writer’s thoughts

As cryptocurrency continues to reshape the financial landscape, brokers and intermediaries must understand the unique compliance challenges it presents. Staying informed, proactive, and principled will be key to guiding clients safely through this rapidly evolving market. Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts myra@fanews.co.za

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