Financial Services Law

Practice Areas > Financial Services Law

Financial Services Law for Blockchain Companies

Blockchain companies often function as financial services companies within the eyes of the law, especially companies that invest in or use cryptocurrencies like Bitcoin, Ether or Dash in their daily operations.  There are many layers of regulation that can apply to such companies, including:

Anti-Money Laundering laws.  The Bank Secrecy Act, as amended by the Patriot Act, imposes a host of regulations on “financial services companies” and others, such as Money Services Businesses.  These laws require such companies to have anti-money laundering policies and procedures in place, and conduct Know Your Customer due diligence on customers or clients.  Having the right policies in place is critical not only in preventing your business from being used as a conduit for criminal proceeds or terrorist financing, but in standing up to an audit.

Data Privacy Laws – Protecting customer data is critical, and there are a host of different legal regimes that govern how you must protect sensitive information about customers and clients.  

Data Security Laws – As with data privacy, covered organizations must take into account and protect sensitive data from hackers and thieves.  

 There are key questions you must be able to answer when it comes to financial services compliance:

 

 (1)  By whom am I regulated (if at all)?  There is an “alphabet soup” of agencies that have jurisdiction over financial institutions and financial services companies, depending on what you are doing.  These agencies can include the Securities and Exchange Commission (SEC), the Office of the Comptroller of the Currency, the Department of the United States Treasury Financial Services Network (FinCEN), and others.  It is critical to be able to identify which bodies of rules apply so that you know who might have jurisdiction over your business;

 

(2)  Have I thought through the policies and procedures that I need to have?  “Governance” is a buzzword that gets used a lot to describe how you run your organization when it comes to your regulatory obligations.  Drafting policies and procedures that cover all the bases isn’t exciting, sexy or directly profitable, but it is absolutely critical to do.  This is because it is infinitely easier to craft how you run your business when it is on your time and terms, rather than when a government regulator is at your door.  We take a “build once, run automatically” approach to drafting your internal documents and training you on what needs to be done.  In other words, our goal is to empower you to bake good governance and compliance principles into your company culture so that it becomes part of “how things are done”.  This then allows you to focus on your core business, boosting sales, and growing intelligently.

 

(3)  Do I have the resources I need to create what I need?  We serve clients with in-house compliance departments that need to remain current on the ever-changing world of regulation all the way to one man or woman operations who just need the essentials.  Having a skilled attorney by your side makes all the difference when it comes to getting it right the first time.

There are many banking and financial legal issues that arise in the cryptocurrency space, including the applicability of the Bank Secrecy Act (BSA) to exchanges, when a business is considered to be a “money transmitter”, and when Know Your Customer / Anti-Money Laundering (KYC / AML) rules will apply.

International legal issues incorporate elements of all of the above areas of law and more.  Clients often have questions as to the best jurisdiction in which to incorporate, which invokes traditional tax questions concerning citizenship, income sourcing and what opportunities are available to plan one’s tax affairs.

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