OFAC recommendations for virtual currency industry participants
Karsten Wenzlaff, Advisor
August 26th, 2025
Karsten Wenzlaff is a Crowdfunding and Fintech Expert from Germany. He is Secretary-General of Digit[...]
Category Archives: Blockchain, Crypto, Digital Assets Regulations
FDIC Chair: U.S. regulators exploring how banks could hold crypto assets
ComplianceX | | Oct 27, 2021
REUTERS/David Swanson
LAS VEGAS (Reuters) – A top U.S. bank regulator said U.S. officials are looking to provide a clearer path for banks and their clients that are looking to hold cryptocurrencies, in order to keep control over the fast-developing asset.
Jelena McWilliams, who chairs the Federal Deposit Insurance Corporation, told Reuters in an interview on Monday that a team of U.S. bank regulators is trying to provide a roadmap for banks to engage with crypto assets. That could include clearer rules over holding cryptocurrency in custody to facilitate client trading, using them as collateral for loans, or even holding them on their balance sheets like more traditional assets.
“I think that we need to allow banks in this space, while appropriately managing and mitigating risk,” she said in an interview on the sidelines of a fintech conference. “If we don’t bring this activity inside the banks, it is going to develop outside of the banks.… The federal regulators won’t be able to regulate it.” Jelena McWilliams, Chair, FDIC
McWilliams’ comments provide the fullest picture yet of what regulators are exploring as part of a cryptocurrency “sprint” team first announced https://www.reuters.com/technology/fed-occ-fdic-sprint-regulation-crypto-quarles-says-2021-05-25 in May. The goal of the team was to ensure cryptocurrency policy coordination among the three main U.S. bank regulators – FDIC, Federal Reserve and Office of the Comptroller of the Currency.
The rapid emergence of cryptocurrency has led to a murky regulatory picture in the United States.
See:
U.S. Justice Department Sets Up National Cryptocurrency Enforcement Team
Top US regulator tells crypto exchanges they need to ‘come in and talk to us’
Hester Peirce: Lawless in Austin
United States: FDIC Proposes Roadmap For Fintechs To Become Insured Banks
As regulators circle above, how should the DeFi industry respond?
Under previous leadership, the OCC took an aggressive approach to bringing cryptocurrency into banks, including blessing https://www.reuters.com/article/us-usa-banks-cryptocurrency/u-s-banks-given-regulatory-green-light-to-safekeep-cryptocurrencies-idUSKCN24N2HI bank custody services for cryptocurrency, while other agencies were slower to act.
Those decisions are now under review, according to acting Comptroller Michael Hsu.
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The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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SEC Chair Gary Gensler speaks to Yahoo Finance about Bitcoin ETF, DeFi and Stablecoins
Yahoo Finance | Oct 25, 2021
In a wide-ranging interview with Yahoo Finance's Brian Cheung, SEC Chair Gary Gensler discusses cryptocurrency regulation, the GameStop trading frenzy, and various conflicts tied to retail investing and crypto trading
Video Transcript of SEC Chair Gary Gensler with Yahoo Finance interview by Brian Cheung (BC)
Gary Gensler is chair of the Securities and Exchange Commission, the government's top financial markets watchdog. Gensler joined the SEC in April 2021, and is facing many regulatory puzzles from payment for order flow to ESG corporate disclosures to, of course, cryptocurrencies. The former MIT professor and Baltimore, Maryland native is no stranger to the regulatory world. Having served as the head of the Commodity Futures Trading Commission under the Obama administration. He's also an alumni of Goldman Sachs with a deep knowledge of Wall Street.
See: Hester Peirce: Lawless in Austin
BRIAN CHEUNG: Just wondering if you had any thoughts about how those two products rolled out, the ones from ProShares in addition to Valkyrie. Is anything that you're seeing, the volume and interest in this brand new product also guiding your thoughts on maybe the possibility of these applications that you're working through on a Bitcoin spot ETF? Do you feel like anything that you've seen, though, with the Bitcoin futures products last week are resolved? Are any of those concerns kind of alleviated given what we've seen, the response to those products be?
GARY GENSLER: Brian, you can imagine I'm not going to speak to any individual filings that might be in front of us or prejudge anything. But I think that the concern for the investing public is the crypto asset space to plus 2 and 1/2 trillion dollars. Most of it has not come within an investor protection remit. And thus, investors are protected the way they are, whether they go into the stock or bond markets that we've overseen for so long. Without that, I think that it's really is, as I've said to others, a bit of the Wild West. And these markets largely around the globe, 24 hours a day, seven days a week don't have the similar protections against fraud and manipulation and front-running and other abuses.
BC: So let's move on to stablecoins kind of sub corner in the crypto space. They've been eating a lot of lunch from the prime money market funds. And there's been some media reporting that's gotten a lot of attention about the transparency by which some of these stablecoins are detailing what's actually underlying the reserves that back these assets. You've compared stablecoins to chips at a Casino. Do you think that stablecoin should be regulated as banks?
See: SEC likely to target stablecoins this week, report says
GARY GENSLER: Well, there's about $130 billion stablecoins today. That's up nearly tenfold in the last year. And they are intertwined inside of crypto exchanges, crypto lending platforms, so-called DeFi. And those poker chips, so to speak, are facilitating 80% of the volume. So there are only 5% of the crypto market.
But 80% of the volume in this token to token, crypto to crypto trading. And so I think there's a lot of speculative activity. And again, it's best to bring that inside regulatory investor protection remit. So I do think there's work to be done here.
BC: What you kind of said right there about the amount of volume that we've been seeing in this space does kind of also extend to the broad DeFi movement. Just wondering what your thoughts are on DeFi. Obviously, it stretches into a lot of different areas. What do you feel like the SEC's role is in regulating that space? Just kind of your broad thoughts on that.
GARY GENSLER: Decentralized finance has started to press up some other innovations. While that's all interesting, it reminds me a lot about when peer-to-peer lending came along about 15 years ago. People said, well, I'll lend money to you and it would just be peer-to-peer. And we had to take 3, 4, 5 years to bring it within an investor protection, and in some cases, banking regulation.
See: SEC says GameStop’s wild stock surge was not short covering
And I would say that's what we're going through right now. The same process, hopefully, we get to the other side where whatever innovation it's there survives. But again, the public is protected. We protect against financial stability concerns as well. There's a lot of lending going on. There's a lot of trading going on. And without protections, I fear that it's going to end poorly.
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The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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Hester Peirce: Lawless in Austin
SEC | Oct 8, 2021
Thank you to the Texas Blockchain Summit for the chance to be here today. I have to start with my disclaimer that my views are my own and not those of the Securities and Exchange Commission or my fellow Commissioners. I am interested, however, in what my colleagues have to say, which is why Chair Gensler’s habit of calling the cryptoverse the “Wild West” has captured my attention. He is not alone in referring to the crypto landscape as the Wild West, a place we imagine to have been lawless—a society in which the gunslinger with the best reflexes and worst morals wins at everyone else’s expense.
See: SEC likely to target stablecoins this week, report says
Merriam-Webster defines the “Wild West” as “the western U.S. in its frontier period characterized by roughness and lawlessness.” Bringing government into that kind of an environment to establish some order seems like a no-brainer. Today, however, I will offer a different take on the Wild West and, with that picture in mind, suggest a way forward in crypto regulation.
Texas may come to mind more readily than my native Ohio when we think of the old West. Here too, though, the Wild West was marked by more order than the movies would have us believe. Andrew Morriss, who, after a stint at Case Western Reserve University, moved West and eventually ended up in Texas, researched the Wild West and identified numerous forms of effective private regulation, which were effective precisely because they faced competition. He explained, for example, that Texas cattlemen, whose ranches were delineated by clear property lines, were able to “creat[e] order on their ranches.” One ranch’s code “prohibited cowboys from gambling, carrying six-shooters, keeping private horses, running game with [ranch] horses, drinking, and stealing cattle from other ranches.”
See: SEC commissioner: Investors have the right to make their own decisions without regulators standing in the way
As detailed in an article titled “The -Not So Wild, Wild West,” western order was not limited to ranchers imposing gambling bans on their cowboys, but also included an array of private organizations dedicated to maintaining order:
[I]t appears in the absence of formal government, that the western frontier was not as wild as legend would have us believe. The market did provide protection and arbitration agencies that functioned very effectively, either as a complete replacement for formal government or as a supplement to that government.
On the other hand, ironically, our gunslinging ways in the old, supposedly staid, government regulatory world back East are causing people to question our commitment to the rule of law. Let me explain by raising several questions about our regulatory approach to date. I will conclude by suggesting that it is not too late for government regulators to set clear rules that respect the unique attributes and challenges of life on the crypto frontier.
I. Is There Really Legal Clarity Around Digital Assets?
II. Are We Enforcing Rules by Settling or Settling for Ambiguity?
III. Are We Fighting for Investors or Fighting for Jurisdiction?
IV. Are We Protecting Investors or Denying Investors Opportunity?
V. Are We Going to Pretend Everything is Centralized So We Can Regulate It?
VI. Are We Catching Bad Actors or Creating a Catch 22?
See: Hester Peirce on personal liberty, crypto regs and retail investor particiation
- Can the platform custody client assets, a feature typical of centralized crypto trading platforms? If so, how, given our concerns about custody of digital asset securities?
- If not, could a sufficient number of broker-dealers navigate the registration process to make a liquid market?
- Would the conditions placed on their registration permit them to function as market makers or to facilitate trading on behalf of retail investors?
- Can the platform trade non-securities alongside securities? If not, how can the platform, using two entities—a broker-dealer entity for digital asset securities, and an affiliated non-broker-dealer entity for non-securities, offer a seamless, or at least serviceable, trading platform to customers, who are likely, for example, to want to trade both digital assets and digital asset securities and pay for transactions in digital asset securities using non-security digital assets?
- How can a trading platform and its customers determine whether a particular digital asset is a security?
- If a token was sold in a securities offering as part of an investment contract, how long must secondary transactions in that token be deemed to be securities transactions by platforms trading the tokens?
- What are the mechanics of registering tokens sold as part of an investment contract as a class of “equity security” under the Exchange Act?
Conclusion
These questions are intended to spur a deeper cross-government commitment to searching for sensible regulatory solutions. The stakes are high because the government is riding into crypto town with the promise that it can do a better job than the existing informal disciplinary mechanisms.
See: Hester Peirce on personal liberty, crypto regs and retail investor particiation
We do have regulatory experience that we can bring to bear here, but we have to do so carefully. As government agencies consider how to regulate, they ought to take their lead from Congress, work collaboratively with one another, and actively consult the public who will be subject to and protected by the rules. I might approach this whole endeavor with a less strict hand than some of my fellow regulators, but the real question is not what I or any other regulator wants, but what you the people—the intended beneficiaries of this regulation—want. I am eager to see what you accomplish on the crypto frontier once we set some sensible, clear regulatory parameters.
To paraphrase the standard closing words of a popular crypto podcast, which follow an appropriate warning about the riskiness of the space, “[You] are headed West. This is the frontier. It’s not for everyone. . .”
Thank you for allowing me to drop in on your journey West.
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The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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SEC likely to target stablecoins this week, report says
ComplianceX | Jack Kelly | Oct 26, 2021
The Securities and Exchange Commission has won a debate among US agencies to propose legislation and oversee the $131 billion stablecoin market, Bloomberg reported on Monday.
The Wall Street watchdog’s “significant authority” over tokens like tether will be spelt out in a report expected to be published this week, Bloomberg said, citing sources familiar with the matter.
Agencies including the Treasury will ask Congress to pass legislation stating coins should be regulated like bank deposits, one source said.
See:
A Regulated Stablecoin Means Having a Regulator
On the Brink Podcast: George Selgin of the Cato Institute on Stablecoins, Bitcoin and Free Banking
FCA Chair Charles Randall Discusses Crypto, Stablecoins and Digital Asset Regulation
More regulation coming: SEC Chairman signals stablecoins and other tokens could fall under its rules on security-based swaps
The report is expected to highlight the SEC’s powers, as Chairman Gary Gensler has been pushing for oversight and the ability to pursue enforcement action.
It will clarify how the Biden administration will regulate the sector, with several agencies including the Commodity and Futures Trading Commission likely to have a role. These developments suggest the government will have clear and active authority over the stablecoin market, while waiting for longer-term plans to be enacted.
Prior versions of the report called on Congress to create a bank-like charter that would treat stablecoin issuers as if they are banks.
Gensler, who has compared stablecoins to poker chips at a casino, has been calling on lawmakers for a while to give the SEC more authority to regulate the industry.
There might be an upside to the SEC winning this battle. According to Jaret Seiberg, a DC-based financial services policy analyst at Cowen, the range of stablecoin issuers could widen under the SEC’s watch, despite its tough stance on these digital assets.
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The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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OFAC publishes U.S. virtual currency industry guidance for sanctions compliance
Linklaters | Oct 22, 2021
OFAC recommendations for virtual currency industry participants
A U.S. regulator has again reminded the virtual currency industry that it is subject to the same compliance obligations as more traditional industries. Last week, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) issued specific guidance regarding the application of U.S. sanctions requirements to the virtual currency industry.
OFAC views participants in the virtual currency industry as playing “an increasingly critical role in preventing sanctioned persons from exploiting virtual currencies to evade sanctions and undermine U.S. foreign policy and national security interests.”
See: CSA and IIROC Publish Guidance and Regulatory Framework for Crypto Asset Trading Platform Compliance
As with any sector of the economy, virtual currency industry participants are expected to evaluate a variety of factors in assessing their unique sanctions risks and formulating a risk-based compliance strategy. In the guidance, OFAC identifies the following key measures that virtual currency industry participants should carefully consider in implementing their risk-based compliance programs:
- Geolocation Tools – these tools allow companies to determine the locations of IP addresses, in particular to identify any that are in comprehensively sanctioned jurisdictions; OFAC makes clear that a failure to use such tools could lead to enforcement actions if transactions occur in relation to comprehensively sanctioned jurisdictions.
- KYC Procedures for the Virtual Currency Industry – OFAC recommends that companies perform information gathering throughout a customer relationship’s lifecycle: in connection with onboarding, during periodic reviews, and when processing transactions.
- Transaction Monitoring and Investigation Software – through this technology, companies can determine whether transactions involve certain identifying information that is associated with persons who are either on a sanctions list or are located in a comprehensively sanctioned jurisdiction.
- Sanctions Screening – as in virtually any industry, particularly the financial services sector, OFAC expects the virtual currency industry to implement controls reasonably designed to screen customers and counterparties against sanctions lists
See: Canadian Regulators Bringing the Canadian Crypto Sector to Heel
Looking ahead – the industry is on notice
OFAC’s guidance makes clear that it means to hold all actors in the virtual currency industry accountable, from technology companies to exchangers, administrators, miners, wallet providers, and even traditional financial institutions exploring new virtual currency assets and services.
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The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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Digital money is an opportunity for Canada – if we seize it
The Globe and Mail | and | Oct 21, 2021
Robert Fay is the managing director of digital economy at the Centre for International Governance Innovation. David Dodge is a former governor of the Bank of Canada and is senior adviser at Bennett Jones LLP.
Around the world financial systems are digitizing to provide faster, cheaper and more secure and comprehensive services to households and businesses.
Meanwhile, cryptocurrencies, stablecoins and central bank digital currencies are attracting substantial public attention. They are reflections of the continuing digitalization of the global economy, driven by innovation and competition, that is creating new opportunities worldwide.
The potential benefits are many.
Digital currencies and payments can speed up and lower transaction costs, both domestically and especially across borders, while bolstering security. Financial technology (fintech) is expanding the range of financial services available in the marketplace.
See: Bitcoin Electricity Consumption Index (CBECI): China’s crackdown puts US in pole position and Canada in 4th
Open banking allows consumers and small businesses to securely and efficiently transfer their financial data among financial institutions and accredited third-party service providers. It can stimulate competition, facilitate access, and expand the range of services available to households and businesses.
And central bank digital currencies can spur innovation and boost financial inclusion, ensuring all have access to digital services.
But fully harnessing the benefits of digitalization will require a sound and coherent framework that ensures collaboration between the public and private sectors.
We recently held a workshop to hear the opinions of international and Canadian experts in this domain. As we explain in more detail in a new report, we argue there are three essential steps that Canada must take.
First, Canadian governments and service providers need to work together to deliver what has already been placed on the agenda; namely, a modernized payments system and secure data transfer to facilitate open banking.
Second, Canada requires a thoroughly updated legislative framework for privacy and data management, and the adoption of industry standards for digital identification. Governments, the central bank, and regulators, working with market participants, must adapt existing policy frameworks to accommodate and harness change in a manner that supports a financial system that is efficient, competitive, stable, secure, inclusive, and one that instills trust. It is essential to ensure data security and privacy and enable consumers to have greater control over their financial data in ways that promote sound competition.
See: Bank of Canada to become new regulator of fintech companies doing payments processing
Third, regulatory gaps must be remedied. Existing regulatory frameworks are ill-suited to deal with new and emerging market structures.
Federal leadership here is crucial. Risks must be taken.
To deliver on these three essential steps, the federal government must exert strong leadership in mobilizing the necessary collective effort; making policy and market choices will require a careful balancing of objectives. Win-win solutions must be pursued, but there will be trade-offs at the margins – for example, between efficiency and stability, or between compliance and privacy.
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The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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U.S. Justice Department Sets Up National Cryptocurrency Enforcement Team
ComplianceX | | Oct 18, 2021
The U.S. Justice Department is creating a national cryptocurrency enforcement team to tackle investigations and prosecutions of criminal misuses of cryptocurrency and to recover the illicit proceeds from these crimes, Deputy Attorney General Lisa Monaco said Wednesday.
The creation of the National Cryptocurrency Enforcement Team, which would be under the supervision of Assistant Attorney General Kenneth Polite Jr., will focus on crimes committed by virtual currency exchanges and mixing and tumbling services, the DOJ said in a statement. The team also would help trace and recover assets lost to fraud and extortion, the DOJ said.
A virtual currency “mixer” or “tumbler” charges customers a fee to send cryptocurrencies to a designated address in a manner designed to conceal the source or owner of the currency.
See:
SEC Empowers Enforcement Staff To Take Immediate Actions To Combat Emerging Potential Problems | Hester Pierce Calls For Clear Regulations
Top US regulator tells crypto exchanges they need to ‘come in and talk to us’
NCET would strengthen DOJ’s capacity “to dismantle the financial entities that enable criminal actors to flourish—and quite frankly to profit—from abusing cryptocurrency platforms,” Ms. Monaco said. “As the technology advances, so too must the department evolve with it so that we’re poised to root out abuse on these platforms and ensure user confidence in these systems,” she said.
The team would combine expertise from the DOJ criminal division’s money-laundering and asset recovery section and its computer crime and intellectual property section, as well as from U.S. Attorneys’ Offices across the country.
NCET also is looking for a leader with experience with criminal investigations and in the underlying technology for cryptocurrency and blockchain.
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The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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