Top 3 Things to Pay Attention to in Regulation & Audit
As the Crypto industry continues to expand, regulations and audits are becoming increasingly important for businesses operating in the space. Moving into 2023, it’s essential to be aware of the key Crypto regulatory and audit considerations that will be relevant in the coming year. We will discuss three key areas paying attention to; compliance with existing Crypto regulations, new crypto regulations on the horizon, and best practices for conducting Crypto audits.
Compliance with Existing Regulations
One of the most important things to pay attention to ahead of Crypto Regulation and Audit in 2023 is Compliance with existing regulations. This includes:
- Familiarising yourself with existing international, national, federal laws and regulations, such as those related to anti-money laundering (AML) and know-your-customer (KYC) requirements.
- Being aware of state-level regulations that may also apply, and ensuring compliance with those as well.
- The Distributed Ledger Technology (DLT) framework in place since January 2018, which is one of the first of its kind globally.
- Reviewing and updating internal controls and procedures to ensure ongoing compliance with regulations coming from international, regional, national and federal levels.
New Regulations on the Horizon
In addition to compliance with existing Crypto regulations, businesses and individuals operating in the Crypto space should also be aware of new Crypto regulations that are likely to come into effect in 2023. These include:
- The much-debated Markets in Crypto-Assets (MiCA) Regulation is expected to enable Crypto companies to drive towards compliance in 2023. MiCA is intended to close gaps in existing EU financial services legislation by establishing a harmonised set of rules for crypto-assets and related activities and services, & the classification of crypto-assets into sub-categories.
- The Financial Action Task Force (FATF) proposed new guidelines for virtual asset service providers (VASPs), which could have a significant impact on the crypto industry.
- Some countries are considering the implementation of Central Bank Digital Currencies (CBDCs), which could also have implications for crypto businesses.
- Several countries have proposed new legislation related to the crypto industry, such as the Digital Asset Business Act in Bermuda, which could impact crypto businesses operating in those jurisdictions.
- The UK Treasury has announced its intention to continue to bring cryptoassets within the regulatory perimeter.
Best Practices for Conducting Crypto Audits
Another important consideration ahead of Regulation and Audit in 2023 is the need for effective auditing practices. To ensure compliance with regulations and identify any potential issues, it’s crucial to conduct a thorough and accurate audit of a Crypto business or individual’s assets. Some best practices for conducting crypto audits include:
- Using specialized audit software that can cope with an ever evolving regulatory landscape
- Working with experienced Crypto auditors
- Regularly reviewing and updating internal controls in alignment with your core governance & risk frameworks
- Maintaining accurate and detailed records of all transactions in order to be able to close your books
- Building an all company data dictionary and/or business glossary to drive towards a shared language. Even within the regulatory sphere there are significant challenges around what to call this industry – whether that be Crypto, Digital Assets or Virtual Assets. No final decision has yet been reached.
Conclusion
As the Crypto industry continues to evolve and mature, Crypto regulations and Crypto audits will become increasingly important for businesses and individuals operating in this space. By staying aware of compliance with existing regulations, new regulations on the horizon, and best practices for conducting Crypto audits, businesses and individuals can better prepare for regulation and audit in 2023 and beyond.
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