Is your client secretly a crypto exchange?
Sigma Ratings

2.5 quintillion bytes of data created each day, according to Forbes. Much of this is online conversation. While these conversations frequently occur between anonymous individuals, and the information may be unverifiable, at Sigma we believe these conversations can provide incredible insight into the behavior of individuals attempting to circumvent the controls of the financial system. Our work has led us to discover content such as the following:

The use of online forums and online currencies such as Bitcoin to circumvent controls is only going to increase. We recommend leaders within financial institutions to pay attention to not only online content but also technology innovations such as Bisq, a decentralized and anonymous Bitcoin exchange that matches individuals who want to exchange Bitcoin for fiat currencies such as US dollars or Euros. 

Bisq enables anyone to skip using centralized exchanges, and therefore KYC, to buy cryptocurrency directly from other individuals, using their Bank, a Money Services Business (MSB), or payment app. Any financial institution doing payments is exposed to this technology and millions of dollars a day are already being moved via Bisq. How many financial institutions have transaction monitoring scenarios to detect Peer to Peer (P2P) exchange? Even if those scenarios existed, how many institutions have capacity for the potential massive influx of alerts that will occur as this technology proliferates?

Even further, are institutions prepared to comply with regulatory demands? In the United States, FinCEN has already set the precedent, that selling cryptocurrency P2P requires registration as an MSB. How many financial institutions have done the KYC to even know if their customers are engaged in this activity? How many know if their small businesses clients are offering Bitcoin ATMs, another business that would require MSB registration in the US? As the industry matures, there will be invariably be more questions than answers.  That said, asking the right questions is critical to safeguarding the financial system.  While not a panacea, those questions, we believe, can be better informed via the wealth of public data being generated every day.

marvin-meyer-syto3xs06fu-unsplash.jpg
Insights straight to your inbox
DELIVERING BREAKING INSIGHTS AND NEWS FROM AROUND THE WORLD

Thanks for submitting!