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Duco: Why good data management is key to keeping crypto regulation at bay

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Duco: Why good data management is key to keeping crypto regulation at bay

Cryptocurrencies have entered the business landscape with a vengeance and brought with them calls for increased regulation. Although industry regulation seems inevitable, strict regulation could cause big problems for cryptocurrencies.

But why? jimmy Huangstrategy and solutions engineer, Ducoa fintech enabling financial services firms to take control of complex data using self-service technology, spoke to The Fintech Times to discuss the impact of regulations on crypto organizations, while highlighting the importance of handling financial data carefully and responsibly to avoid stricter regulations.

With seven years of experience in the financial industry, Huang explained why data management is such a hot topic in the crypto sphere:

Jimmy Huang, Strategy and Solutions Engineer, Duco
Jimmy Huang, Strategy and Solutions Engineer, Duco

By 2021, the market capitalization of crypto-assets had increased 3.5 times to $2.6 trillion, demonstrating the incredible speed at which the world of digital assets is changing. However, due to this growing interest, calls for increased regulation are getting louder and louder. Crypto asset markets are seen as a potential future threat due to their scale, structural vulnerabilities, and growing interconnectedness with the traditional financial system.

The regulations have sparked a real debate among players in the crypto landscape. Those who see it as necessary believe that without a clear set of guidelines to legitimize digital assets around the world, crypto businesses will not have the certainty they need about whether they will be allowed to continue operating or no – a huge potential barrier to future growth. of this industry. Others, however, believe a key role for cryptocurrency is to challenge established frameworks.

The drastic shift in attitudes towards regulation in this space has been reflected in countries around the world. China has banned all trading and mining of cryptocurrenciesthe UK only has regulations involving platforms that must register with the CIFand India is gone back and forth between wanting to ban and not banning cryptocurrencies.

Nevertheless, whether you are pro or anti-regulation, the inevitable fact remains that stricter regulations are on the horizon, which begs the question: what could be the impact?

The difficult nature of cryptographic compliance

Global regulators are paying more attention than ever to cryptocurrency transactions in a combined effort to avoid any serious implications for global financial stability. Therefore, the need for crypto businesses to adhere to compliance responsibilities is becoming more and more urgent. Yet, due to blurry boundaries defining how crypto assets are sold and traded, and ill-defined regulations, cryptocurrency companies are set up for a rough time from the get-go.

First, determining what a crypto asset actually is can be extremely problematic; with different regulators governing different types of assets, the nature of cryptocurrency is being questioned. An example is the current course SECOND v Ripple lawsuit that shows how the dynamic nature of regulatory decision-making in the space can make compliance a very difficult task for crypto companies. It also shows how financially burdensome non-compliance penalties can be.

Second, once you figure out what a crypto asset is, then you have to deal with the extreme amount of data created by that asset. Take Bitcoin for example: data relating to transactions, purchases, and conversion rates are all passed to systems in long streams of text with huge decimal places beyond that of traditional currency transactions. Most reconciliation platforms are not data agnostic and therefore cannot handle data of this complexity and scale. This makes cryptographic data management a challenge that compels companies to fall short of compliance.

Third, the regulatory landscape is constantly changing with the complexity, versatility and volume of new regulations all contributing to the compliance difficulty faced by cryptocurrency companies. Just ask traditional banks, who now spend a huge percentage of their costs on compliance alone. The diversity of regulations can be difficult for a single organization to manage, especially without the right technology to do so.

And finally, policies such as AML and KYC are becoming stricter to combat money laundering and the processes needed to ensure compliance have a large data component. Without easy access to accurate and enriched customer and counterparty data, organizations are bound to be significantly slowed in their ability to stay compliant.

Overall, it becomes necessary for crypto businesses to implement extremely flexible and adaptable architectures to deal with anti-money laundering, identity verification, data collection, accounting and the reconciliation.

Why Automated Data Processes Matter for Compliance

As mentioned, data management deserves special attention here. All parties involved in cryptography are well aware of the importance of data and processing integrity, due to the sheer volume of data that passes through these architectures and the nature of cryptography. Nevertheless, the influence of stricter regulations has reinforced the vital need for cryptocurrency companies to have good data management systems to handle financial data with utmost care.

As businesses scale and span consumers as well as institutional processes, they need to purchase or build more and more front-end and back-end systems to cover their growing needs and allow them to adapt to possible challenges. unforeseen. These systems will all evolve rapidly over the next few years and process a large volume of data at peak times.

This data must flow between these systems in a transparent and secure manner. Like cryptographic scales – complementing nifty front-end solutions with user management – ​​data reconciliations and verifications on Excel spreadsheets will no longer be acceptable and probably won’t be viewed kindly by auditors in the future.

Strengthening governance

In response to increasing regulation, many crypto companies have already started to assemble a governance layer from SaaS solutions, especially in the AML and KYC space, which allows them to identify, control, manage and manage. mitigate their data through the use of subscription-based software. By improving data governance through automated data processes that can handle the scale and volume of data, crypto businesses can effectively mitigate the risk of being deemed non-compliant and can ensure that data is consistent and reliable.

When crypto companies automate end-to-end processes, the risk of security threats and data breaches is greatly reduced, as is the risk of errors caused by data entry errors – ultimately, the data integrity becomes more secure.

Overall, due to the volatility of the regulatory environment, the scale of the volumes encountered and the pace of innovation, it is essential for crypto businesses to invest in solutions that are adaptable, highly scalable and can be deployed quickly. . In return, businesses will run much leaner operations, be more compliant, and receive the added bonus of transparent visibility into their operations.

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