Foggy Regulations Challenge Crypto, Gemini Compliance Chief Says

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Elena Hughes joins cryptocurrency exchange Gemini in 2020 after more than a decade at traditional financial institutions

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Ms Hughes said she found it while navigating the evolving regulatory landscape at Gemini, which is similar in process to financial firms enacting the Bank Secrecy Act, an anti-money-laundering rule, and its implementation in the early 2000s. Amendment.

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Ms. Hughes manages the approximately 40 people on Gemini’s compliance team, who work on issues such as transaction monitoring and investigation and customer onboarding, and reports to the company’s chief legal officer. A major industrywide issue she is working on is the so-called travel rules.

The US Treasury Department last year proposed rules that would enforce existing banking regulation known as the Travel Rule for transactions in cryptocurrency. The Treasury Department said that banks and cryptocurrency trading platforms must collect, keep and pass on records of customers’ cryptocurrency transactions and counterparties for any transaction over $3,000 – including verification of their identities. The Treasury issued its proposed rules and sought comments from the public but has yet to meet the rules.

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Businesshala spoke with Ms. Hughes about her experience moving from a more traditional financial-industry career to working for a fintech firm, recruiting compliance professionals and her outlook on the challenges Gemini faces in the coming year. I talked. Edited excerpts follow.

Businesshala: Why did you decide to switch from working for traditional financial institutions to a crypto startup and how did you navigate that transition?

Ms. Hughes: I spent most of my professional private sector career in the anti-money-laundering sector… When I joined the industry in 2007, we were still feeling around and noticing what [the USA Patriot Act] In fact it looks like some of these firms, broker-dealers and others who were not in the broader form of an AML framework back in the day.

It was interesting to see that industry grow and revisit the industry through a variety of scams, from Ponzi schemes to the 2008 financial crisis, what the outcome was and some of the repeated financial crime activities that firms continue to identify. What I really liked about Gemini in particular – and perhaps the crypto space more broadly – ​​is its ability to iterate and manage this risk while still working for what I called the “grey”.

I think what was really amazing about making the transition to a Gemini is that Gemini is themselves well regulated. The framework for compliance that existed even before I joined was familiar to me in terms of the thought process about structuring a financial crime program, which at its core begins with identifying risks, understanding what we do. We are dealing with products, whether the customers we want to target, how we deliver our products. These are the same basics.

The difference, of course, lies in the asset class itself, and some nuance about how we survey and monitor for activity in this asset class that goes beyond your traditional money-laundering typologies that we are all used to with one asset. There are transfer approaches.

Businesshala: In this tight labor market and in an industry seeing rapid growth, what does recruiting compliance professionals look like for Gemini?

Ms. Hughes: I think the market is really very competitive right now… we’re looking to add and iterate because what we’re doing on a day-to-day basis is assessing the risks and identifying emerging risks. The company is growing and we need to adjust to those risks… for example, if we’re entering a new jurisdiction.

The challenges we face are so interesting to solve that it really makes compliance exciting… and because from the perspective of the US alone, there is no single regulator that oversees everyone today, and so we have [multiple] The regulators we are looking at are rightly so. we accept the rules [the New York State Department of Financial Services], to a multitude of state regulators and the like. It takes a really creative and iterative staff to make sure we’re pulling all the right levers and complying with all the right requirements.

Businesshala: What challenges are you looking forward to for the coming year?

Ms. Hughes: One of them is a persistent, definite lack of regulatory clarity in certain aspects of the industry or business in which we engage. The second is the Travel Rule Compliance Initiative that we have started as an industry that is applicable to us. The asset class or blockchain technology is such that, even if you want to be compliant, unless you want to transmit your customer information on the blockchain, there is really no way or [the method] did not exist to enable firms to comply in a meaningful manner.

So this decentralized industry has come together and effectively created this solution, [which] This centralized mechanism is to be used to identify who is on either side of the transfer.

The US Travel Rules Working Group, now changed to the “Trust”. [an acronym for the Travel Rule Universal Solution Technology] There is effectively a group or amalgamation of these players in the space, myself and Coinbase and others, who have partnered to create this compliance-focused regulatory solution to comply with the rule. I think this is an extremely powerful topic because it negates some of the fundamental criticisms that crypto firms do not want to comply or are unregulated or that it is free for all.

We are really here collectively because we are passionate about this industry. We are passionate about this asset class. And we think that for this to work, you have to continue to build trust in this ecosystem. And to get there, you have to make sure people are working above board. And that’s how we’re thinking about it.

Write Mengqi Sun [email protected] . Feather


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