Compliance weekly – 07 February 2022

Why compliance is important in the digital asset industry

In this report we observe and track all relevant events that have unfolded in the compliance and digital asset space during the past seven days.


BTC is back to the 40K mark and according to KPMG’s “Pulse of Fintech” report, investment into the crypto space has surged to $30B in 2021. The US Department of Treasury has also released its findings on a study on the facilitation of money laundering and the financing of terrorism through the trade in works of high-value art. The study has found that emerging digital art markets, such as the use of non-fungible tokens (NFTs), may present new risks, depending on the structure and market incentives. To counter these risks, the study has proposed the enhancement of private sector information sharing programs, updated guidance and training for law enforcement, enhanced due diligence, and applying AML/CFT requirements to certain art market participants. Staying on the NFT front, Nike is taking StockX, an online reseller, to court over the licensing rights of an NFT valued at $3.8B.

An opinion piece from the Coindesk team looks into the sustainability of pseudonymity in the metaverse where it is clear that concealing the identities of alleged criminals can have far reaching consequences if they are allowed to hold high level positions. Nintendo has announced that it is considering ways to utilize NFT’s and more bad news is on its way to Meta as the Australian Competition Commission has announced that it is investigating Meta over crypto scams.


Binance has issued a warning to its users of a SMS scam whereby a text message is sent to the victims requesting that they authorise the cancellation of withdrawals. When the users follow the link, they are directed to a fake website where their login credentials are then stolen. The IRS has lost its battle against the Nashville couple for the taxation of staking rewards. The court found in their favour, ruling that the rewards should only be taxed when they are sold for USD. The UK has also released a Crypto Assets Manual on the taxation of ledining and staking crypto assets. 

The Indian Tax Department has released a statement clarifying that although the taxation of crypto assets will assist it with evaluation of the market, it does not legalize crypto trading. The head of the Tax Department JB Mohapatra stated that: “The crypto trade or the digital assets transactions do not ipso facto become legal or regular just because you have paid taxes on that”. Dynamic Securities Analytics (DSA) has released its 2021 Cryptocurrency Exchange Suspicious Activity Report findings which indicates that SAR’s filed by major cryptocurrency exchanges stand out from those filed by other types of MSB’s. Cryptocurrency exchanges located in San Francisco filed more Suspicious Activity Reports than all securities firms and casinos combined and cryptocurrency exchanges appear to have trouble classifying activity into existing SAR categories. Approximately $3.6B worth of BTC that was derived from the 2016 Bitfinex Hack was moved from a hackers wallet. The International Monetary Fund (IMF) has called on El Salvador to halt its adoption of BTC as legal tender as it is concerned about its volatility and laundering capabilities.


In the Netherlands, a man has been sentenced to 17 years of imprisonment for laundering €4.4m in cash into BTC. This relates to an elaborate scam of buying and selling approximately 40,000 BTC between 2013 and 2015.


The continuing growth and adoption of fintech, the inclusion of major technology firms in the traditional offshore space and the massive increase of the crypto-assets market are creating a new era of competition, leading to what we see as better client service and innovative financial products. At their heart with these latest trends, we are seeing the already existing players’ change their business models and even the financial-market structures/products they offer. We are seeing well established, large, regulated, global companies change the way they have done things to attract the new clients operating in the blockchain space.


This week has been an interesting one with a lot of waves made in the NFT space on its use cases and whether trademarks apply. The regulation and taxation of virtual assets has also been on the forefront, but it is clear that there still is no one size fits all adoption on how to regulate and tax virtual assets. 

If you have any questions about crypto compliance, please feel free to have a look at our services or contact us to set up a free call to discuss your needs.

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