Regulatory Compliance in Blockchain Finance

#FinTech | #Regulation - 🚨 Big move from the Financial Conduct Authority on #Cryptoasset Regulation 🚨 The UK Financial Conduct Authority (FCA) has just published its long-awaited Consultation Paper (CP25/25) on how the FCA Handbook will apply to regulated cryptoasset activities. This is a major milestone in bringing crypto firmly inside the UK’s regulatory perimeter. So, what’s changing? 🔹 Scope of Regulation Expands For the first time, activities like #stablecoin issuance, #custody, trading platforms, intermediation, and staking will all fall under the FCA’s remit. Firms must seek authorisation under FSMA before carrying out these activities in the UK. 🔹 “Same Risk, Same Regulatory Outcome” Crypto firms will now face requirements already familiar to traditional finance firms, including: Senior Managers & Certification Regime (SM&CR) – personal accountability at leadership level. Operational Resilience standards – stress-testing for outages, hacks, or validator failures. Financial Crime rules – AML/CTF, the Travel Rule, and stronger systems against fraud and scams. High Level Standards (PRIN, COND, GEN) – conduct, governance, and treating customers fairly. 🔹 Consumer Protection is Front & Centre The FCA is clear: crypto harms are real. Their research shows: 26% of UK crypto users have been targeted by scams, with 10% losing money Many consumers wrongly believe they have financial protections when buying crypto. The proposed rules aim to reduce risks like mis-selling, poor disclosures, hacks, and the infamous “single point of failure” (think Quadriga or FTX collapses). 🔹 Economic Impact The FCA’s cost-benefit analysis estimates: £130m in reduced losses from scams over 10 years. £92m in compliance costs for firms (IT, governance, reporting) In short: stronger markets, fewer consumer losses, but firms must invest heavily in compliance. 🔹 A Global Signal The FCA isn’t acting in isolation. With the EU’s MiCA, US debates around stablecoin laws, and Asia tightening rules, this consultation shows the UK wants to position itself as a safe but competitive hub for digital assets. This is not the end of “wild west crypto” in the UK—it’s the start of a maturing market where innovation can scale within clear guardrails. Firms that can adapt will benefit from higher trust and access to institutional adoption. Those that can’t may struggle to survive.

The Importance of Compliance in Tokenization As Real-World Asset (RWA) tokenization becomes one of the fastest-growing segments in the blockchain industry, compliance has emerged as the defining factor separating sustainable innovation from short-lived hype. A truly compliant RWA token isn’t just backed by real assets—it’s built within the framework of established securities laws that protect investors and legitimize the market. The Legal Foundation: Securities Regulations In the United States, any token representing fractionalized ownership in an income-generating enterprise is likely to be classified as a security under the Howey Test. This means issuers must adhere to SEC regulations such as Regulation D, Regulation S, or Regulation A+. At LandInvest.io, the $PRPTY token is structured under **Reg D (506c)** for accredited U.S. investors and **Reg S** for international investors, ensuring it meets both domestic and offshore compliance standards. Know Your Customer (KYC) and Anti-Money Laundering (AML) Standards Compliance doesn’t stop at securities registration. A compliant RWA ecosystem must verify the identity and source of funds of each investor. That’s why $PRPTY token issuance and transfer are gated by strict KYC and AML protocols using trusted verification providers. This ensures that every holder of $PRPTY is a verified investor, building a transparent and legally sound ownership base. Smart Contracts with Built-in Compliance Controls True compliance extends to the blockchain itself. The $PRPTY token uses ERC-1404 and ERC-1400 standards, enabling smart contracts that restrict transfers to approved wallets only. These tokens can’t be freely traded on unregulated exchanges—they follow legally programmed rules that prevent violations of securities law. This is what differentiates compliant security tokens from speculative DeFi projects that ignore regulation entirely. Global Investor Protection and Blue Sky Filings Compliance also includes proper registration and filings at the state level. LandInvest Corp performs necessary Blue Sky filings in relevant U.S. jurisdictions, ensuring investors are protected under both federal and state law. This adds an additional layer of transparency and legal oversight. The Future of Regulated Digital Ownership A compliant RWA token isn’t just an investment vehicle—it’s a bridge between traditional finance and blockchain technology. As regulators tighten oversight and institutions enter the space, compliance will become the foundation for all legitimate RWA projects. At LandInvest.io, compliance isn’t a checkbox—it’s a cornerstone. It ensures that investors in $PRPTY aren’t speculators chasing hype, but equity owners in a real, regulated, and revenue-producing enterprise. Real Assets. Real Compliance. Real Ownership.

I am asked all the time what to read to keep up with the latest regulatory expectations for compliance teams. My answer always includes enforcement actions. They are more than just a response to one firm’s failings—they are often how regulators send a message to the broader market about what “good” looks like and where the bar is moving. Last week’s New York State Department of Financial Services consent order against Paxos Trust Company is a good example. DFS imposed a $26.5 million penalty and required $22 million in AML program enhancements through 2027. The findings point to gaps in four critical areas—due diligence, onboarding, transaction monitoring, and investigations—each with lessons for the rest of the industry. DFS found that Paxos relied heavily on third-party assurances—accepting statements from Binance about geofencing and KYC controls without independent validation. In practice, that meant no testing, no documentation of results, and no ability to prove to regulators that controls were functioning. Onboarding procedures failed to connect related accounts, missed links between wallets and customers, and did not flag higher-risk jurisdictions or unusual activity patterns. These are precisely the areas where a modern blockchain intelligence provider can deliver insights—through entity resolution, behavioral analytics, and geolocation capabilities. Transaction monitoring was another weak point. Rules were static, meaning they didn’t adapt to new typologies like rapid cross-chain layering, coordinated structuring, or high-risk exchange hopping. Investigation protocols lacked detailed guidance—there were no clear escalation criteria, and responses to law enforcement requests were inconsistent. Without a system that integrates case management, blockchain tracing, and open-source intelligence in one place, alerts were harder to resolve effectively. For other firms, the takeaways are clear: • Independently verify partner controls – Use your own analytics and investigative tools to test KYC, and sanctions. • Enhance onboarding – Link on-chain and off-chain identifiers, analyze behavioral patterns, and validate documents in context. • Implement real-time monitoring – Detect high-risk activity as it happens, with rules tuned to evolving typologies. • Strengthen investigation workflows – Ensure analysts can pivot from an alert into blockchain tracing and OSINT quickly. • Conduct regular independent testing – Bring in reviewers with deep subject-matter and technical expertise. • Resource compliance teams – Provide the authority, budget, next gen tech and partnerships needed to keep pace with a rapidly evolving risk landscape. TLDR? Compliance success today requires next-gen blockchain intelligence, real-time detection, and expert program design to meet the expectations regulators are signaling. Superintendant Adrienne A. Harris 👇discussing expectations for NYDFS regulated firms.

I thought I was done with prudential policy after my time at ISDA - but clearly, I was wrong! The global financial system is changing, and fast. Tokenised government bonds, regulated crypto ETFs, and fully-backed stablecoins are no longer experiments, they’re part of financial markets today. However, as a new letter and report published by Global Blockchain Business Council (GBBC), Global Digital Finance, GFMA, ISDA and other leading trade associations argues, banks - the very institutions best placed to bring oversight, governance, and scale to these innovations - are being held back by the current Basel Committee on Banking Supervision (BCBS) Cryptoasset Standard. The problem? 1️⃣ 𝐏𝐮𝐧𝐢𝐭𝐢𝐯𝐞 𝐜𝐚𝐩𝐢𝐭𝐚𝐥 𝐫𝐞𝐪𝐮𝐢𝐫𝐞𝐦𝐞𝐧𝐭𝐬 - a 1250% risk weight for many crypto exposures treats them as if they were toxic, regardless of actual risk profile. 2️⃣ 𝐎𝐧𝐞-𝐬𝐢𝐳𝐞-𝐟𝐢𝐭𝐬-𝐚𝐥𝐥 𝐭𝐫𝐞𝐚𝐭𝐦𝐞𝐧𝐭 - permissionless blockchains vary widely in governance and security, yet the rules don’t recognise these nuances. 3️⃣ 𝐌𝐢𝐬𝐬𝐞𝐝 𝐨𝐩𝐩𝐨𝐫𝐭𝐮𝐧𝐢𝐭𝐢𝐞𝐬 𝐟𝐨𝐫 𝐬𝐭𝐚𝐛𝐥𝐞𝐜𝐨𝐢𝐧𝐬 - ignoring real-world prudential improvements, evolving stablecoin models, and regulatory advances.  We believe the BCBS framework can, and should, evolve. By adopting a risk-sensitive, technology-neutral approach guided by the principle of 𝘴𝘢𝘮𝘦 𝘢𝘤𝘵𝘪𝘷𝘪𝘵𝘺, 𝘴𝘢𝘮𝘦 𝘳𝘪𝘴𝘬, 𝘴𝘢𝘮𝘦 𝘳𝘦𝘨𝘶𝘭𝘢𝘵𝘪𝘰𝘯 we can achieve the following: ⚖️ Keep innovation inside the regulatory perimeter; 🌐 Support a level playing field across markets; and 💱 Ensure that banks can play their role in connecting traditional and digital finance safely. Updating the BCBS framework doesn’t mean lowering standards - it means building ones that are fit for purpose in a digital era. 📖 Read more in my op-ed with Matthew Osborne in The Banker: https://lnkd.in/gr-MX3Bu

2nd Global Cryptoasset Regulatory Landscape Study by University of Cambridge and Swiss Secretariat of Economic Affairs SECO The global #Blockchain and #Cryptoasset landscape is evolving rapidly, with regulators facing the challenge of balancing financial innovation and risk mitigation. The Cambridge Centre for Alternative Finance (CCAF) has released its second comprehensive study on the #Cryptoasset regulatory environment, analyzing approaches across 19 jurisdictions. Key Findings: 🔹 Diverse Regulatory Approaches Regulatory frameworks remain highly fragmented, with some jurisdictions embracing bespoke regulations while others retrofit existing frameworks. Some Emerging Markets and Developing Economies (EMDEs) continue to impose bans, often due to concerns about currency substitution and capital outflows. 🔹 Stablecoins & Market Integrity #Stablecoins are a key focus for regulators, with Advanced Economies (AEs) leading regulatory developments. While ensuring stability and redeemability remains a priority, approaches to reserves and governance structures vary significantly. 🔹 Classification & Definitions Remain Inconsistent Jurisdictions differ on terminology—terms like "cryptoasset", "virtual asset", and "digital asset" are used inconsistently. Many regulators prioritize consumer protection and classify cryptoassets as speculative investments rather than currencies. 🔹 Licensing & Compliance for Cryptoasset Service Providers (CASPs) Regulators are tightening requirements for #FinTech firms offering staking services, custody, and exchange operations. Some jurisdictions mandate that a share of customer cryptoassets be stored in cold wallets for security purposes. 🔹 Anti-Money Laundering (AML) & Consumer Protection AML compliance remains a regulatory priority, with most jurisdictions aligning with FATF standards. Measures such as blacklists of non-licensed firms, advertising restrictions, and financial literacy initiatives are being deployed to protect retail investors. 🔹 Future Outlook: Regulation of DeFi & Tokenization The study highlights early regulatory initiatives around Decentralized Finance (DeFi) and the tokenization of financial instruments, though regulatory frameworks in these areas remain nascent. Authors & Contributors: 📄 Research Team: Hugo Coelho (Principal Researcher), Alexander Apostolides, Keith Bear, Nick Clark, Natalia Cordeiro de Lima Fleichman, Kalliopi Letsiou, Aarvi Singh, Bryan Zhang 🔍 Reviewers & Contributors: Parma Bains (IMF), Cristina Cuervo (IMF), Nobuyasu Sugimoto (IMF), Jon Frost (BIS), Jamere McIntosh (BIS), Nico Hess (FINMA), Yann Thorens (FINMA), Gabrielle Inzirillo (ADGM), Dr Rhys Bollen (ASIC), David Halperin (ASIC), Joachim Schwerin (European Commission), Thomas Puschmann (Global Center for Sustainable Digital Finance, Stanford & Zurich University), Dea Markova (Forefront), Charles Kerrigan (CMS), Mike Ringer (CMS), Gabriel R. Bizama (University of Bern). #Blockchain #FinTech #DeFi

A Financial Services Consumer Panel response to FCA's CP25/28 consultation on Progressing Fund Tokenisation(Chapters 2 to 4). Consumer expectations in investing are shifting fast. The FCA Consumer Panel highlights in the consultation response a clear generational divide: 🔹 47% of neo-broker users are aged 18–34, while 49% of traditional platform users are 55+. 🔹 66% of young investors make decisions within 24 hours, with 14% acting in under an hour—often influenced by social media and FOMO. 🔹 Younger investors are 80% more likely to hold ETFs, showing their preference for flexible, real-time trading and fractional ownership. 👉 These trends underline the urgent need for clearer disclosures, intuitive product frameworks, and platforms designed for digitally native consumers. Here are the main themes from our response: 🔹 Innovation must not compromise investor safeguards. Tokenised funds should provide equivalent rights, transparency, and recourse as traditional systems. 🔹 Concerns about cloud dependency, private key control, interoperability gaps, and smart contract failures. 🔹 Need for clear rules on liability, dispute resolution, privacy safeguards, and legal domicile when using public blockchains. 🔹 Call for plain-language, standardised disclosures (e.g., one-box summaries) on risks, insolvency, FSCS applicability, and dealing structures. 🔹 Require human oversight (“human-in-the-loop”) for eligibility checks and remediation. 🔹 Support for use of digital cash/stablecoins, with caps, segregation, auditability, and disclosure.  🔹 Clarify legal domicile and resilience standards for public blockchain use. 🔹 Retain Consumer Duty but supplement with cryptoasset-specific rules and guidance. To dive into the details of this consultation response and the comprehensive list of the Panel's other consultation responses, please visit: https://lnkd.in/edtPuzhV #ConsumerProtection #CryptoRegulation #FCA #Stablecoins #Cryptoassets #Fintech #InnovationStrategy #FinancialServices #RegTech #DigitalFinance

Yesterday, U.S. national banks got the go‑ahead to act as crypto brokers without holding tokens on their balance sheets. Here’s why that matters for mainstream finance. Key points: 🌐 Broker role clarified: The OCC’s Interpretive Letter 1188 concludes that national banks may engage in “riskless principal” crypto‑asset transactions, simultaneously buying and selling a digital asset for two customers, so long as the bank doesn’t hold inventory. 🌐 No inventory risk: Banks must act only as intermediaries, executing offsetting trades at the best available price and immediately passing the asset between clients. 🌐 Business of banking: The OCC frames these transactions as akin to brokerage of financial instruments such as derivatives and within banks’ statutory authority under 12 U.S.C. 24(Seventh). Activities must be conducted safely and soundly, with appropriate risk management. 🌐 Background context: The guidance follows industry demand for a way to serve crypto clients without custody risk. It also notes that banks must comply with BSA/AML, sanctions and consumer protection obligations 📌 Here are key takeaways: ✅ Opportunity with caution: Banks considering crypto brokerage should build robust trading, settlement and AML frameworks comparable to those used for customer derivatives transactions, including verifying counterparties. ✅ Policy clarity: The OCC is signaling willingness to integrate crypto into banking provided institutions avoid proprietary trading and maintain strong compliance. This could reshape how corporate treasuries access digital assets. ✅ Watch for interplay with other regulators: Even with OCC approval, banks must coordinate, where necessary, with the Fed, FDIC, CFTC and/or state regulators. A comprehensive regulatory map is essential before launching services.

B. Salman Banaei been one of my market integrity heroes since 2021. His incredibly thoughtful congressional testimony this week at the House Financial Services Committee - where he cited Solidus Labs as an example of the right kind of infrastructure for market surveillance of on-chain assets - is an absolute must-read for anyone trying to understand how tokenized security markets reach real adoption, safely. Watching his testimony was a circle-closed moment. Roll 5 years back. In 2021 I came across an NPR interview with a CFTC lawyer named Salman Banaei. His insights inspired me to write a CoinDesk op-ed on how the industry should think about enabling effective crypto trade surveillance. It was a time when the SEC was still rejecting Bitcoin ETFs and regulators were just beginning to grapple with crypto manipulation. Salman already had a clearer vision than most in DC. He spoke of his experience modernizing the CFTC's surveillance program following the May 2010 flash crash, when market technology moved faster than the ability to monitor trading, triggering a 9% market drop within minutes, hurting millions. Collecting all the surveillance data required to investigate what happened took months, and it led to a realization in Washington that agencies absolutely needed smarter surveillance programs. Jump to this week, here’s my key takeaways from Salman’s testimony -  Tokenization doesn't need a whole new rulebook; it needs careful calibration of existing frameworks. A few points stood out: → On fixed income: TEFRA's bearer bond rules are inadvertently blocking tokenized bond issuance on permissionless blockchains. A targeted fix could unlock a massive market.  → On equities: Don't rush. Fragmenting liquidity between tokenized and non-tokenized equities could be disastrous. Onchain IPOs are the lower-risk entry point.  → On illicit finance: Onchain seizure rates approach 12%, multiples above traditional finance. The compliance case is stronger than skeptics assume. → On regulation: Time-limited "innovation exemptions" can be a trap. Full ATS registration with tailored requirements is the durable path, and surveillance needs to be built into the architecture from the start. On that last bullet, Salman cited Solidus in his written testimony as an example of the infrastructure FINRA and the SEC should look to as they build onchain market surveillance for tokenized securities. Salman’s point aligns with an argument Solidus has been making since we started the company. The most acute question is whether the infrastructure gets built with that in mind, or bolted on as an afterthought. With tokenized asset trade surveillance, we shouldn’t wait until another crash takes place, this time in an even more complex and fragmented cross- on- and off-chain environment. We shouldn’t wait for investors to get hurt, and regulators to take months to even reconstruct what happened. The time to move to the next generation of trade surveillance is now.

Oliver Wyman - Compliance in the Era of Stablecoins: What the GENIUS Act Means 5 Key Takeaways 1️⃣ Regulatory Clarity Arrives - The GENIUS Act provides the first federal framework for US stablecoins, requiring 1:1 reserve backing in high-quality dollar assets and licensing for issuers. 2️⃣ Four Paths to Market Entry - Institutions can: (i) facilitate stablecoin payments, (ii) integrate third-party stablecoins, (iii) join a consortium, or (iv) issue their own. - Each path comes with distinct risk and compliance obligations. 3️⃣ New Risks Beyond Traditional Finance - Stablecoin activities introduce solvency, technology, operational, consumer protection, fraud, and financial crime risks that demand upgraded frameworks and tools. 4️⃣ Compliance Burden Varies by Player - Banks may adapt existing structures, but tech firms and new entrants must build compliance, AML/KYC, and consumer protection functions from scratch. 5️⃣ Proactive Frameworks Are Critical - Firms must align stablecoin strategies with corporate goals, assess regulatory expectations, and enhance resilience across treasury, IT, compliance, and risk management. Real Life Example - Just as Zelle® transformed digital payments through a bank consortium, we could see similar models for stablecoins. A group of financial institutions issuing a jointly backed stablecoin could spread costs and risks while setting industry standards. Why It Matters - Stablecoins are moving from the periphery into the core of global finance. The GENIUS Act signals Washington’s intent to lead — but compliance and risk management will determine who thrives in this new era. What Happens Next - Institutions now face a choice: build, join, or adopt. Those who develop robust compliance frameworks early will not only meet regulatory standards but also capture first-mover advantages in payments, settlement, and customer engagement. Great work Stefano B. and Jordan C.

Blockchain analytics just went from innovation to expectation. #NYDFS now treats these tools as baseline controls for any bank or #FinTech exposed to virtual currency. On September 17, 2025, the New York Department of Financial Services issued an Industry Letter making clear: if you’re a banking organization in New York with exposure to virtual currency, even indirectly through your customers, regulators expect you to be using blockchain analytics as part of your compliance program. This is not a new regulation. But it is a signal that DFS is treating blockchain analytics as a baseline control for AML, sanctions, and broader risk management. Wallet screening, source-of-funds verification, VASP due diligence, and anomaly detection are no longer “nice to have.” They are compliance expectations. For FinTechs, banks, and VASPs alike, the message is clear… the tools and intelligence once seen as innovative are rapidly becoming regulatory minimums. Examiners will ask “What analytics are you using? How are you documenting decisions? How is this embedded in your risk framework?” And you will need to prove it with comprehensive documentation. The compliance frontier is shifting. Firms that wait to integrate blockchain analytics until compelled will be at a disadvantage, not just in exams, but in building the trust that regulators and counterparties now demand. Full DFS Letter here: https://lnkd.in/e6WFvntQ #FinTech #Blockchain #CryptoCompliance #VirtualCurrency #DigitalAssets #BlockchainAnalytics #Web3Compliance #FinTechLaw #RegTech #PolicyUpdate #LegalTech #RegulatoryChange #FinTechPolicy #ComplianceLaw #BankingInnovation #FinancialServices #FutureOfFinance #CryptoRegulation