Blockchain intelligence firm Chainalysis has appointed a former official from the U.S. Financial Crimes Enforcement Network (FinCEN) as chief technical counsel, as the company responds to new international compliance standards for the cryptocurrency sector.
Mike Mosier, formerly chief of strategic advancement and tactical development at FinCEN, brings extensive compliance and enforcement experience to Chainalysis, after serving at the money-laundering regulator and other regulators over the past 10 years.
His first task is to develop solutions, both technical and legal, in response to the new “travel rule” imposed by the Financial Action Task Force (FATF), which requires crypto exchanges to identify and share information on those receiving and sending transactions between them.
Specifically, the rules are problematic for the cryptocurrency sector, due to a reliance on pseudonymous wallet addresses, creating a significant technical challenge for compliance.
Beyond cryptocurrency exchanges, the rules also extend to wallet providers, with companies required to meet the standard, despite strong opposition from the industry.
Chainalysis itself has been a vocal opponent of the proposals, arguing that they will place companies under “onerous investment and friction,” with the warning that a number of regulated firms could be forced out of business by the requirements.
Nevertheless, the standard was adopted by FATF last week, and companies in all FATF member countries will now be expected to meet the standard for transaction between different exchanges and wallet providers.
Mosier’s challenge will be to identify ways in which this new, significantly more strenuous compliance standard can be met.
According to Mosier, Chainalysis will work with blockchain industry stakeholders to help devise technical and legal strategies for meeting the new requirements.
“There have been a few ideas, but I think it’s a bit too early to see something that will work,” he said.
The travel rule is already a standard feature of mainstream banking, and Mosier conceded there may be some lessons to be learned from the way banks initially tackled their version of the same problem.
However, with time running out for the industry to respond, it looks like there is a lot of pressure on Mosier to hit the ground running.
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