ICOs, Cryptocurrencies and the Regulatory Conundrum: Coinfirm Responds

As a staunch libertarian, you’ll find me generally reticent about regulatory restrictions. In fact, a book I’m reading entitled Bottleneckers: Gaming the Government for Power and Private Profit has further strengthened my resolve on this issue.

As a journalist following the massive developments taking place in the new money economy, I’ve grown increasingly concerned however about the unrestricted proliferation of cryptocurrencies and initial coin offerings (ICOs) in the blockchain space.

These “under the radar” projects many of which are often tossed together with a hastily developed website and whitepaper have in my opinion the potential to undermine the otherwise promising advancements taking place in the world of distributed technology. It has been particularly alarming to witness the growing frequency of fraudulent, pump and dump schemes which victimize those who are unaware of their vulnerability.

For some time now as a reporter, I have charting the evolution of Coinfirm, a global company headquartered in London that’s dedicated to the safe adoption and use of the Blockchain. Coinfirm’s AML/CTF Platform employs proprietary algorithms and big data analysis to provide structured, actionable data that boosts efficiency, reduces costs and streamlines compliance for financial institutions, asset management firms, cryptocurrency enterprises and business intelligence companies.

Perhaps Coinfirm’s biggest contribution however to the regulatory compliance conversation has been as a public voice and advocate for sensible regulation that protects consumers, businesses and even nations from nefarious actors. Coinfirm is also actively addressing gaps in financial inclusion that prevents so many of our global citizens from achieving financial freedom. Because prevailing compliance system and related tools and processes are so ineffective, scores of individuals and entities are have been locked out of the financial system as a whole.

Coinfirm has pledged to address this issue, not only through compliance effectiveness and accuracy, but also by developing a new model that allows market participants to value and rate others. Coinfirm believes that this will bring a whole new level of democracy and safety to compliance.

To capture some additional perspectives on developments in the Cryptocurrency/Blockchain compliance space, I reached out via email to Pawel Kuskowski, co-founder and CEO of Coinfirm. Here’ s what he had to share:

2017 been an interesting year for the world for blockchain/crypto regulatory compliance. What have you been learning?

It’s more about what the regulatory ecosystem and cryptocurrency industry has been learning as it has migrated toward the aims we defined early on here at Coinfirm. One of those aspects is building a global standard for cryptocurrency as this technology was built on not having jurisdictions in mind. We believe that segmenting regulatory approaches isn’t a viable long term solution as state by state attempts in the U.S. have demonstrated.

Any other discoveries?

We’ve also seen a huge step in terms of a mature and responsible approach from cryptocurrency related companies and even ICO’s. At any time we here at Coinfirm are serving around 40 ICO’s for AML. This has provided us a glimpse at how the industry approach to this aspect has changed. We’re also currently working with major financial institutions on implementing our platform as a standard so that they can transact in a compliant manner with cryptocurrency entities.

So it sounds like both the startup and large institutional sides have matured and are starting to find common ground in their aims.

For sure. That’s why I believe that 2018 will really be an exciting year as we see cryptocurrencies truly entering into the mainstream. A good part of this progress is tied to solutions like ours along with the maturing approach we’re seeing by cryptocurrency companies themselves.

What has been your message to naysayers who believe that regulation is a major hindrance to blockchain innovation?

I say let’s take a practical and pragmatic approach to this as we continue to grow in our understanding of the blockchain. Certainly, the wrong regulatory approach can be very harmful. Therefore it’s important to keep in mind that the mass, traditional markets and all of the companies and users currently in it are not able to properly interact with cryptocurrencies unless there’s a process or solution provided for them to fulfill their regulatory and client obligations. That’s one reason we view what we do as so important — we’re providing that bridge for both cryptocurrency entities to interact with the traditional economy as well as for players in the traditional economy to interact and benefit from cryptocurrency entities.

So in a sense Coinfirm is functioning as a linkage builder?

Yes. Without this bridge being built an exploding bottleneck would take place hindering the world of cryptocurrency from reaching its full adoption and potential. At present, creators still the freedom to generally roam about unrestricted in today’s world of unregulated or “private” cryptocurrency transactions. What’s missing is an option for the companies and entities who understand the importance of going down a regulated path.

I understand that Coinfirm has launched a AMLT token for anti-money laundering compliance? Can you briefly discuss this?

The AMLT token reflects our intent and vision to not only further streamline and automate our platform, but to make the broader financial system more transparent and democratic. Currently the risk assessment process involves a small set of central entities determining risk ratings all while the market itself and its participants have little or no voice. This has created quite a few issues as many entities are financially excluded for being in what are considered high risk areas. So we thought “what if there were a system where market entities can contribute in terms of proving that a particular individual entity in a high risk area is actually legit and not risky.’ This could positively affect the risk assessment of that entity, potentially opening up the global market and financial system to them. Moreover, in return for providing valid data into our platform, market participants will have the ability to be rewarded with AMLT. So this token offers a unique mutual benefit and incentive.

How does the AMLT token advance your broader anti money laundering compliance agenda?

It allows us to not only capture unique market data provided willingly by market participants but it further allows us to build our continuously growing network of cryptocurrency entities around our AML/CTF platform. If you look at our original company materials, you’ll see that one of our main goals is to open up the financial system to more people by making the compliance aspect more efficient and effective. If we continue to move in the direction we’re moving now, with AMLT, we can make it possible for an service entity in, say, Somalia, to be able to interact with the global financial system because we’ve provided them with a proper risk analysis according to their actions versus a blanket ban tied to the region they’re in. This would not have occurred previously as they would have been blocked by the ineffectiveness and discrimination of the current compliance ecosystem.

Finally, what 2–3 emerging trends do you see on the horizon over the next 12–18 months as we close 2017 and head into 2018?

Likely the biggest will be the explosion of cryptocurrency in the traditional financial world. As I mentioned before we’re working with multiple major financial institutions, funds and commercial entities on providing them the AML compliance layer they need to fully engage the cryptocurrency market and provide cryptocurrency services to the masses. 2018 is going to be a big year when it comes to this. ICO’s and the ICO market is going to continue to refine itself and shed the “spam” or “garbage”. We will see various forms of them emerge, like Micro ICO’s and major ICO’s run by major traditional entities. Also AML for ICO’s will become a standard. We’re already seeing it through the number of requests we have. All in all, things are about to get very interesting for sure.

Credit: Diamond-Michael Scott

The #Blockchain AML risk & compliance platform.