Popular exchange and brokerage service Coinapult has announced a partnership with regulated financial services provider Crypto Capital. The move means that Coinapult can continue its operation as an exchange, wallet and brokerage service, while outsourcing their anti-money laundering (AML) and know-your-customer (KYC) duties to Crypto Capital.
Explaining the benefit to the company, Coinapult issued a statement on May 20 describing how the they will no longer be handling their own financial regulation compliance work.
“Coinapult will no longer request know-your-customer (KYC) documentation. This allows anyone to utilize Coinapult's pricing services and API without restriction. Crypto Capital will be performing KYC for customers who want to deposit or withdraw fiat currencies. Additionally, limits on account volumes have been lifted.”
CoinTelegraph has previously reported on the increasingly difficult set of regulations facing digital currency companies operating in the U.S. As a growing number of states begin drafting and applying their own financial requirements for these companies to meet, startups face a legal minefield when trying to remain compliant.
Speaking on the Let's Talk Bitcoin podcast of May 6, one of Coinapult's original co-founders Erik Voorhees, who subsequently left the company in January 2014, explained his earlier reasoning for closing the company's U.S. office and moving the operation to Panama.
“[Governments] think that their fiat currencies will outlive Bitcoin, but they're wrong. Once they realize that they're going to become very hostile, and we basically didn't want to build a bitcoin company in the U.S. because of that.”
Digging further into his experiences of the regulation and legal situation of digital currencies, Voorhees shared his more recent understanding that the problem lies with serving U.S. customers, rather than in having the operation based there.
“It's far more important where your customers are than where you are. So it probably would have been just fine if Coinapult had stayed in the U.S., but just blocked the U.S. as a jurisdiction, so that customers from the U.S. couldn't use it. That's probably almost as good as leaving the country with the actual office and the people.”
The company’s partnership with Crypto Capital makes sense from this point of view, as Voorhees has found a way for the company to serve U.S. customers, while avoiding the legal risks of needing to be compliant with the varying regulations of all 50 states.
Crypto Capital will be taking on the legal responsibilities involved with checking customer's credentials and making sure that record keeping and fund processing meets the conditions set by customers’ countries and, in the case of the U.S., their state. The imminent release of the finalized BitLicense legislation in New York will be an early test of this arrangement, and a sign of things to come, as many states are expected to emulate the cryptocurrency regulation.
Crypto Capital is a registered fiduciary, meaning they are authorized by their customers to hold assets and funds in trust on their behalf. In the case of digital currency companies, this means they are able to hold fiat and other funds in trust under separate Crypto Capital banking accounts. In this way, some of the legal obligations surrounding the holding of customer funds are transferred away from the client — in this case.
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Explaining the benefit to the company, Coinapult issued a statement on May 20 describing […]