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  /  Economy   /  Exclusive: Micapass CEO Gintarė Košubienė Discusses AML Compliance Shift in Crypto Post-Binance Fine

Exclusive: Micapass CEO Gintarė Košubienė Discusses AML Compliance Shift in Crypto Post-Binance Fine

The cryptocurrency industry is on the brink of a transformative shift in Anti-Money Laundering (AML) compliance, a change propelled by the recent landmark fine imposed on Binance and its CEO, Changpeng Zhao.

The recent anti-money laundering case involving Binance and its former CEO, Changpeng Zhao, which resulted in substantial fines, marks a significant turning point for AML compliance in the cryptocurrency sphere.

Gintarė Košubienė, co-founder of Micapass, a company specializing in AML crypto compliance technology, discusses the implications of this landmark case and the anticipated shift in AML compliance from crypto platforms to end users.

Košubienė points out that traditionally, KYC (Know Your Customer) procedures have been the responsibility of crypto exchanges and other virtual asset service providers (VASPs), which contradicts the decentralized nature of cryptocurrencies.

Changpeng Zhao (CZ) resigns as Binance CEO. pic.twitter.com/JGcUa5jjjK

— Shadow of Ezra (@ShadowofEzra) November 21, 2023

Users’ reluctance to disclose their data has been a major concern. Micapass addresses this issue by developing technology that combines real-time wallet screening with KYC processes, shifting the verification responsibility to users.

This allows them to privately verify their compliance and keep their personal data off-chain, using smart contract-based identities for AML status checks.

Košubienė emphasizes the importance of technologies like Micapass that:

Enable users to prove their compliance within protocols.
Are vital in maintaining data privacy.
Ensure platforms are used by compliant actors, reducing penalty risks.

The government’s recent actions, including the UK Treasury’s solidification of crypto regulations and the SEC’s emphasis on regulatory compliance, indicate a continuing focus on crypto compliance.

Košubienė emphasizes that new technologies like Micapass, which enable users to prove their compliance within protocols, are critical in maintaining data privacy and ensuring platforms are utilized by compliant actors, thereby reducing the risk of penalties.

Gintarė Košubienė Discusses AML Compliance Shift in Crypto Post-Binance Fine


In this exclusive interview, Gintarė Košubienė, CEO and co-founder of Micapass, a pioneering AML crypto compliance technology firm, offers her unique insights into this evolving landscape.

With a focus on transitioning AML compliance from crypto platforms to end-users, Košubienė sheds light on how this shift aligns with the decentralized nature of cryptocurrencies and the broader implications for the industry.

The Binance Fine and its Impact on AML Compliance in Crypto


In response to the question about the implications of the Binance fine, Gintarė Košubienė provides an insightful analysis of how this event is transforming AML compliance in the crypto industry:

Increased Public Awareness: Košubienė notes that the Binance fine has brought the issue of compliance, rather than just scams, into the mainstream media spotlight, raising public awareness about the importance of regulatory adherence in the crypto industry.

Evolving Compliance Needs: She emphasizes that the incident underscores the need for compliance measures to evolve and be innovative, highlighting that having a large team and a compliance office is no longer sufficient in the dynamic crypto environment.

Governmental Action: The fine also signifies the determination of governments to address compliance issues in the crypto sphere, regardless of the size or influence of the business involved, marking a firm stance on regulatory enforcement.

Transition to User-Centric AML Compliance


Gintarė Košubienė addresses the shift from platform-based to user-centric AML compliance, highlighting a transformative change in the approach to regulatory adherence in the crypto world:

Contradiction in Platform-Based Compliance: Košubienė points out that platform-based compliance, where users do not own their data, is at odds with the decentralized nature of cryptocurrencies.

This traditional model places the onus of compliance entirely on platforms, often compromising user data privacy and autonomy.

User-Centric Model Advantages: In the user-centric model, Košubienė explains, users can own their compliance proofs and seamlessly transfer these across different protocols.

This approach significantly reduces the need for repeated KYC processes, aligning better with the decentralized ethos of cryptocurrencies.

Cost-Bearing and Efficiency: She notes that in DeFi, users usually bear transaction costs, such as gas fees.

By shifting to on-chain storage of proofs, the user-centric model logically aligns costs with users, enhancing efficiency and cost-effectiveness.

Micapass’s Role in User-Centric Compliance: Košubienė illustrates how Micapass is pioneering this shift with its solution that offers ongoing AML checks at lower costs, contrasting with traditional models that focus on one-time checks or rely on dashboard-based registries.

Košubienė’s insights reveal a paradigm shift towards empowering users within the crypto space, enabling a more efficient, cost-effective, and privacy-respecting approach to AML compliance.

This user-centric model not only adheres to the decentralized principle of cryptocurrencies but also paves the way for a more streamlined and user-friendly compliance landscape.

Integration of Wallet Screening with KYC in Micapass Technology


Gintarė Košubienė elaborates on how Micapass integrates wallet screening with KYC processes to enhance compliance in the crypto space:

Creation of Digital Identity: Users create a digital identity on Micapass, which serves as a secure repository for storing various compliance proofs required by different protocols. This approach prioritizes user control over their compliance data.

Data Protection and Proof Storage: Emphasizing data protection, Micapass focuses on storing only the evidence of the proof, rather than the personal data itself. This method ensures user privacy while maintaining compliance records.

Dual Proof System for Compliance: Košubienė describes a dual-proof system utilized by Micapass for compliance purposes:

The first proof confirms that the user or their country is not listed on any sanctions list.
The second proof relates to the user’s wallet, ensuring it does not carry a high-risk score.

Košubienė’s insights into Micapass’s technology reveal a sophisticated approach to compliance in the blockchain space.

Impact of Smart Contract-Based Identities on AML in Crypto


Gintarė Košubienė discusses the transformative impact of smart contract-based identities on Anti-Money Laundering (AML) practices in the cryptocurrency sector:

Transition to On-Chain Digital Identity: Košubienė emphasizes that the future of online interactions, particularly in the crypto realm, is moving towards on-chain platforms. In this landscape, digital identities become crucial elements of user interaction and compliance.

Enhancing User Experience and Flow: She points out that digital identity solutions, rooted in smart contract technology, aim to provide an optimal user experience. This approach streamlines processes, making them more user-friendly and efficient.

Facilitating True Decentralization: One of the key advantages, according to Košubienė, is the facilitation of true decentralization in crypto transactions. Smart contract-based identities allow users to participate in the crypto ecosystem without having to disclose their personal identities fully.

Instead, users can prove their eligibility and compliance, aligning with the decentralized ethos of blockchain technologies.

The Future of AML Compliance in Crypto Amidst Regulatory Changes


Gintarė Košubienė provides a detailed analysis of how AML compliance in the crypto industry is expected to evolve in light of recent regulatory actions:

Influence of Global FATF Recommendations: She notes that the Financial Action Task Force (FATF) recommendations, particularly the “Travel rule,” have laid a foundational base for future AML compliance in the crypto sector.

These guidelines are being adopted by major jurisdictions worldwide, with the EU’s Markets in Crypto-assets Regulation (MICA) serving as a model.

Rising Demand for AML Policies: Košubienė observes a peak in demand for developing AML policies within every crypto business. Large enterprises are partnering with established KYC/AML providers to become compliant with the “Travel rule.”

Simultaneously, smaller and medium-sized businesses are seeking cost-effective solutions, opting for identity verification and data-sharing providers for user onboarding.

Diverse AML Policy Landscapes: Currently, there are distinct pools of AML policies varying across different jurisdictions and businesses. She points out that gatekeeping functions are intensifying, but the regulatory landscape still predominantly plays a defensive role.

Evolving Nature of Compliance: Košubienė stresses that compliance is not a one-time activity but an evolving process.

She advocates for the innovation and continuous evolution of compliance practices to keep pace with the dynamic nature of crypto transactions, especially instant payments.

Need for Real-Time Compliance Solutions: The goal is to prevent illicit activities proactively. Košubienė suggests that real-time compliance, achievable through blockchain-based solutions, is essential for addressing these challenges effectively.

Košubienė’s insights depict a rapidly changing landscape for AML compliance in the crypto world, driven by global regulatory frameworks and the need for innovative, real-time compliance solutions.

Micapass’s Role in Aligning with Government Regulations


Gintarė Košubienė elaborates on the crucial role Micapass technology plays in harmonizing with government regulations in the crypto industry:

Micapass as a Regulatory Gatekeeper: Košubienė describes Micapass as acting like a gatekeeper for the crypto protocols. Its primary function is to prevent the entry of illicit funds and sanctioned individuals into the system.

This proactive approach is akin to not letting “bad people into the house,” thereby preventing any potential issues internally and reducing the need for regulatory intervention.

Prevention-Oriented Approach: By stopping unauthorized or high-risk entities at the entry point, Micapass serves as a crucial preventive tool in the crypto space.

This method effectively reduces the likelihood of regulatory issues arising from within the protocols.

Compliance with KYC/AML and Travel Rule: Košubienė highlights that Micapass aligns with government regulations by providing the necessary data for businesses to comply with Know Your Customer (KYC), Anti-Money Laundering (AML), and the Travel Rule requirements.

By doing so, Micapass ensures that the businesses using its technology are adhering to the latest regulatory standards.

Košubienė’s insights reveal how Micapass is strategically positioned to facilitate compliance with evolving government regulations. Its preventive approach not only enhances the security and integrity of crypto platforms but also ensures they meet the necessary regulatory criteria, making it a valuable asset in the landscape of blockchain technology and cryptocurrency compliance.

The post Exclusive: Micapass CEO Gintarė Košubienė Discusses AML Compliance Shift in Crypto Post-Binance Fine appeared first on Cryptonews.