With blockchain technology making major waves in the financial industry, the call for a tighter grip on regulation also grows. Learn why taking compliance proactive steps now can help your blockchain business achieve sustained success.
While the blockchain space is still in its relatively early stages, widespread adoption is causing governments across the world to all start forming their own regulatory frameworks.
Introducing these kinds of measures may still be frowned upon by a lot of the tech world and crypto-community. However, the idea of human intervention via compliance doesn’t necessarily have to be viewed as a contradiction.
In fact, having regulation in place will not only safeguard investments, but it will give those who comply with a competitive advantage over rival blockchain companies. Naturally, getting one over the competition is essential in this industry for one simple reason; scalability.
Where many start-up blockchain companies focus on one element, those who implement a robust strategy based on regulation from the very start will be the complete package. You’ll be able to scale quickly with a clear sight on meeting regulatory requirements and monopolise all of the services your competitors offer on a single basis.
It’s a simple case of establishing your blockchain business as a ‘one-stop-shop’ for it all.
What is compliance?
Before we can delve into the risks of compliance and map out a strategy, it’s vital that you understand what compliance is and why it’s not just a term for lawyers and crypto journalists.
In theory, there’s no universal definition of the term ‘compliance’, with various bodies all interpreting it in different ways. However, there are a set of common terms that all collectively define the meaning of ‘compliance’:
- compliance risk
- the compliance function
- the compliance department
- the compliance officer
- compliance culture.
In your particular case, to be compliant, a business must find practical ways of identifying, managing and tackling any ‘compliance risks’. Ultimately, it’s about striking a balance between making money and playing by the rules in a fair and transparent way. ‘The compliance function’ is the system in which you use to bridge these two vastly different concepts together, while ‘the compliance department’ relates to what type of culture and framework your blockchain company adopts. Implementing a positive and forward-thinking department who conduct best practices on a day-to-day basis will make it easier to fulfil the ‘compliance risks’.
Other key benefits of having a compliance strategy
As well as giving your business the platform to scale quickly, you’ll also benefit in a variety of other ways too.
- Clients – a compliant business with an improved system will make you look more dependable and improve the customer experience as a whole.
- Better governance – improved internal systems and controls will make your company more efficient and allow you to oversee everything.
- Financial gain – better efficiency means a reduction in costs. Being regulated will also make you less likely to lose money through fines or compensation pay-outs too.
- Improved reputation – First-class compliance systems and controls will safeguard your blockchain company from being heavily scrutinised by the media. Plus, if you do run into any trouble further down the line, your robust strategy and infrastructure will make it more likely for regulators to deem it as a one-off or something that can be easily remedied.
- More informed colleagues and employees – well-educated colleagues and employees will mean that they are better prepped and equipped to face irresponsible clients who are out to tarnish the reputation of your blockchain company.
Creating a robust blueprint is the key
Behind every long-term success in business, there’s a master plan – or a blueprint, if you like. Your first step is to choose the right compliance model:
- Centralised model – this is where the compliance department undertakes a lot of the ongoing compliance tasks, like dealing with complaints and approving benefits. This model is often regarded as a safer option, as the compliance department will have a firmer grip on the day-to-day operations and can make alterations. However, it can lead to regular confrontations with different departments as they need to gain approval from the relevant department before proceeding.
- Decentralised model – this option is where the compliance department exercises its own delegation muscle and gives a lot of the day-to-day regulatory responsibility to the rest of the company. Compliance employees are then in charge of monitoring what the business has done, assessing how well it has worked and applying any necessary remedies. This is ideal if you want to adopt a hands-off approach to compliance and want to put the emphasis on other employees to decide whether they want to comply or not.
There’s no right or wrong answer here. Both work, it’s just a case of figuring out which one works best for your particular blockchain company.
Once you’ve made a decision on your approach, it’s a case of creating the plan itself. You can discover how to do this in our newly published book, Blockchain Regulatory Compliance Made Easy, available both in paperback and Kindle format and written by our Senior Managing Partner, Simone D. Casadei Bernardi.
Inside, you’ll find a conclusive guide on this topic, up-to-date regulations applicable to blockchain/FinTech projects in different jurisdictions and actionable pointers on how to successfully launch a blockchain company.
If you get this right and create a ‘one-stop-shop’ model which combines blockchain and regulation, you’ll have a unique opportunity to establish your company as a frontrunner in the financial blockchain space.