More cryptocurrency companies are turning to standard verifications that more traditional financial institutions use in order to meet regulatory requirements, according to Truiloo’s senior VP of identity solutions, Garient Evans.
Cryptocurrency is supposed to allow for anonymity. However, in the last few years regulators and law enforcement have taken action against some of the cryptocurrency brokerages for not being transparent enough, Evans said.
“What you see instead of complete transparency is at least some opaqueness where these firms are trying to use the standard verifications.”
As crypto moves into the mainstream, the sudden explosion of companies offering crypto services has caused security regulators to crack down on firms that don’t adhere to regulatory requirements.
“What you see instead of complete transparency is at least some opaqueness where these firms are trying to use the standard verifications that are available in all of the other financial services to make sure they’re dealing with folks who are not money launders and terrorist funders,” Evans said.
Evans’ comments came during an interview with BetaKit to announce that Trulioo has signed six new customers in the crypto space, ranging from digital asset issuers to exchanges.
Trulioo’s six new clients will use the company’s global verification product for identity checks to help the crypto companies meet their know your customer and anti-money laundering requirements.
Trulioo is a global identity verification startup that claims it provides real-time verification of five billion consumers and 330 million business entities worldwide — all through a single API integration.
Trulioo is valued at $2 billion CAD after securing $476 million CAD in a TCV-led Series D funding round in June that made the Vancouver-based startup the latest Canadian unicorn.
Crypto firms represent Trulioo’s largest customer segment, according to Evans. The startup began working with crypto firms around 2018, and has signed the majority of the companies in the last two years.
“If you look at our total transaction volume, the verifications we do, cryptocurrency is the largest space for us,” Evans said.
The majority of Trulioo’s crypto clients are centralized (CeFi), however, Evans said they’re starting to see some emerging decentralized finance (DeFi) customers, which is relatively new for Trulioo.
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CeFi is generally hosted on a platform, and offers more traditional finance options such as a crypto credit card, crypto-based accounts, and the ability to borrow money. DeFi cuts out financial institutions, and allows strangers to carry out transactions.
“I think there is a view that, inevitably, their on ramps and off-ramps will be monitored and you’ll have to be completely compliant,” Garient said. “That’s where some of the DeFi companies have come to us to see what we offer.”
On ramping refers to taking standard currency and converting it into crypto, while off ramping is converting crypto back into standard currency.
Trulioo’s newest customers are Centbee, a South-African-based company specializing in merchant payments, cross-border remittances and other cryptocurrency-related products; GMO Trust, an issuer of stablecoins, including GYEN and ZUSD; and Omni Matrix, a FinTech startup that launched NordikCoin, a crypto exchange specializing in Bitcoin.
Trulioo also signed on Skilling, a Scandinavian company that allows users to trade over 800 crypto, forex and CFD financial instruments; Strike Protocols, a financial services and technology firm that provides simple capital markets access to crypto-assets; and Vintech Capital, a leading over-the-counter (OTC) digital currency trading desk for institutional buyers and sellers.
“We reach out to companies and encourage them to begin the verifications right away even if the regulations aren’t clear.”
Evans said crypto companies come to Trulioo because the crypto firms operate in multiple countries and have to meet standard money laundering compliance requirements. “That’s our value proposition, the ability to verify consumers around the world,” he said.
The startup’s GlobalGateway solution provides access to over 400 data sources that are able to verify the identities of over five billion individuals around the world through one API, Trulioo claims.
Within Canada, crypto companies must comply with the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC), the country’s financial intelligence unit. Its mandate is to facilitate the detection, prevention and deterrence of money laundering and the financing of terrorist activities, while ensuring the protection of personal information under its control.
Evans said Canadian crypto firms are comfortable using Trulioo’s FINTRAC compliance solution as it ensures companies meet regulatory requirements as they change. The solution complies with the same industry standards that large banks or brokerage firms must meet.
Currently, in Canada, crypto companies must navigate a shifting environment of regulations. Concerned over misleading statements and improper marketing strategies in the cryptocurrency space, regulatory bodies have issued guidelines to rein in advertising that runs afoul of securities law in September.
The Canadian Securities Administration (CSA) and Investment Regulatory Organization of Canada (IIROC) said the new guidelines will help crypto trading platforms understand and comply with requirements under securities law and IIROC rules for advertising, marketing and social media use.
In March, the CSA also issued new guidance for platforms currently trading in security tokens or instruments or contracts involving crypto assets. Part of that framework was the requirement for such firms to register as an investment dealer and become a member of IIROC.
Currently, six crypto-asset dealers are registered with Canadian securities regulators, Wealthsimple, Coinberry, Netcoins, CoinSmart, Bitbuy Technologies, and Fidelity Clearing Canada.
Generally, regulators have been struggling with governing cryptocurrency companies.
In August alone, the Ontario Securities Commission (OSC) flagged four different companies for lacking the proper authority to operate in Canada. And in 2021, the OSC charged Stephan Katmarian, the CEO and COO of Peblik Inc., for violating Ontario’s Securities Act. The OSC charged Katmarian with fraud, trading in securities without registration, trading in securities without a prospectus, and making a statement in information submitted to the OSC that was misleading or untrue.
Back in Vancouver, Trulioo’s Evans said: “We reach out to companies and encourage them to begin the verifications right away even if the regulations aren’t clear about their obligations to do so.”