This past week, I had the privilege of attending the 2024 Chainalysis Links digital assets conference in New York. The event provided valuable insights into the evolving nature of cryptocurrency space and how it’s coming to intersect more and more with the field of identity verification (IDV).
In this blog post, I want to share some key takeaways and their implications for our industry.
The ties-and-pocket-squares set
Compared to crypto events from previous years, one notable change was many more monkey suits—and I don’t mean the kind with ears and a long tail.
I’m referring to the shift in focus from consumer to institutional adoption of cryptocurrency. As more traditional financial institutions (i.e. suit-wearing folks) enter the crypto space, compliance with existing regulations has become a top priority. This was triggered by events such as the SEC approving Bitcoin ETFs and Prometheum announcing custodial services for Ether and opening account sign-ups for institutional clients.
This means that the “anything goes” days of aggressive customer acquisition without proper due diligence are coming to an end. Instead, stricter Anti-Money Laundering (AML) and Know Your Customer (KYC) practices are being implemented to mitigate risks and ensure compliance. This trend highlights the growing importance of robust IDV solutions in the crypto ecosystem.
What I failed to mention above is that only one half of those in suits were the banker types. The other half were regulators and law enforcement—ranging from the IRS, FinCEN, and the New York Department of Financial Services to the FBI and the DHS. Crypto trading clearly has the full attention of federal and state agencies too.
The speed of crypto will need to be matched by speedy IDV with automated AI-powered facial biometric technology.
Tokens of appreciation
Another interesting topic discussed at the conference was the tokenization of assets. While tokenization holds immense potential, challenges remain in bridging the gap between digital ledgers and real-world processes.
These issues include IDV, liquidity, and interoperability, among other factors. Crypto, as with “old fashioned” banking, is about moving a form of currency safely while preserving a strong customer ecosystem. IDV leadership is required to address these challenges and enable the seamless integration of tokenized assets into the broader financial ecosystem.
Only the best will do
During the conference, it became apparent that there are still some missing pieces in the global regulatory puzzle for cryptocurrencies. While some countries, such as those in the European Union, have comprehensive frameworks covering regulatory guidelines, licensing and registration, travel risks, and stablecoins, others like the United States have only partially addressed these areas.
So how should a crypto exchange manage global aspirations with regulatory gaps in the system?
I was encouraged by the comments of some crypto exchanges that they follow the best of all standards. Similarly, as a responsible company operating in the IDV space, IDVerse believes in taking the high road and complying with the best-in-class standards. Through adherence to the most stringent regulations and guidelines, we can ensure that our solutions are not only effective but also ethical and inclusive. This approach is particularly important given the heightening sensitivities surrounding data protection, biometrics, and privacy.
Attending the 2024 Chainalysis Links conference provided valuable insights into the intersection of cryptocurrency and IDV. The shift towards institutional adoption with the keen attention of law enforcement, the challenges of tokenization, and the need for comprehensive regulatory frameworks all underscore the step-up that companies must take in shaping the future of this industry.
Because the other half of the dark suits are watching too.
About the post:
Images are generative AI-created. Prompt: A man from the 1890s wearing a monocle and top hat sits in a chair posing for a portrait. The image is fairly wide and is in black and white. He sits unsmiling and looks off camera to the right. In his hands is a giant coin with the Bitcoin logo. The room is large and ornate with heavy drapes and paintings on the wall. Tool: Midjourney.
About the author:
Terry Brenner is the Head of Legal, Risk, and Compliance for IDVerse Americas. He oversees the company’s foray into this market, heeding to the sensitivities around data protection, inclusivity, biometrics, and privacy. With over two decades of legal experience, Brenner has served in a variety of roles across a diverse range of sectors.
