What is Risk Management?

The risk management process involves identifying, evaluating, and controlling risks to a company’s resources and profits. These dangers can be caused by many things, such as monetary risk, legal obligations, technological problems, strategic management blunders, accidents, and natural calamities.

A practical risk management approach aids a business in taking into account all potential hazards. Risk management also examines the link involving threats and the potential adverse cascade effects on an organisation’s planned objectives.

Because it concentrates on predicting and comprehending risk across a business, this all-encompassing approach to risk management is occasionally called enterprise risk management. Enterprise risk management (ERM), in addition to concentrating on internal and external threats, highlights the need to manage positive risk. Positive risks are chances that, if taken, might boost a company’s worth or, alternatively, hurt it. Every risk management program’s goal is, in fact, to protect and enhance corporate value by taking calculated risks rather than completely eradicating all risks.

What is the Importance of Risk Management?

How Federal Regulators Treat Crypto and BanksProbably never before has risk management been more crucial than it is right now. Because of the quickening speed of globalisation, the dangers that contemporary companies confront have gotten more complicated. The widespread usage of digital technology nowadays has led to the ongoing emergence of new threats. Environmental pollution or Climate Change has been labelled a “danger multiplier” by risk specialists.

Corporations and their governance bodies are reevaluating their risk management plans as the globe grapples with these crises. They are re-evaluating their exposure to risk and investigating the risk-taking process. The group that ought to be engaged in risk management is being re-evaluated.

The possibilities of a more proactive strategy to risk management are being considered by businesses that now employ a reactive strategy, protecting against prior hazards and altering processes when a new challenge causes harm. Supporting sustainability, resilience, and corporate agility is becoming increasingly popular. Businesses also investigate how advanced governance, risk, and compliance (GRC) systems and artificial intelligence technology may enhance risk management.

Risk Management in Banking Industry

Risk management is a vital and quickly changing aspect of a bank’s operations. Risk management basically is calculating the likelihood that an adverse event will result from a specific course of action. It is also crucial in the world of business. A business can never expand or turn a profit if it doesn’t take risks.

Although they can change, the risks that banks typically manage are:

  • credit risks;
  • market risks;
  • operational risks, including reporting risks and risks associated with data governance;
  • liquidation risks;
  • risks associated with technology and information, including; and
  • strategic risks.

However, banks are subject to risks coming from external circumstances over which they have no direct influence, including such global warming risks.

Why do banks control risk?

Banks manage risks for a variety of reasons, including:

  • avoid loss;
  • guarantee survival;
  • keep their reputation intact;
  • preserve the interests of stakeholders;
  • abide by the rules and regulations; and
  • safeguard the bank’s credit standing.

Nonetheless, seeing as banks and the financial system are so crucial to both the domestic and global economies, inadequate risk management has far-reaching effects. This was made clear during the financial crisis of 2007–2008, when authorities had to band together to rescue banks.

Because a bank’s operation revolves around the generation of money, it may limit or even halt lending if it runs into problems, even on a relatively small scale. This impacts how readily available money is to businesses and inhibits economic growth.

For this reason, both domestically and globally, financial organisations and banks are controlled.

Risk Management in Cryptocurrency Industry

Typically, cryptocurrency enthusiasts are impatient to start trading and generating money and neglect to think about the size of their portfolios or how to handle their money. New traders frequently risk in search of a big win while paying little attention to strategies that promote sustainability. If you recognise yourself in that description, it is worth looking at specific risk management techniques that, when properly implemented, can safeguard you and allow you to continue in the industry without emptying your savings.

There can be no question that bad things will happen to you when trading cryptocurrencies. Terrible experiences include trades that result in the opposite of what you wanted, odd price surges, errors, and numerous other undesirable occurrences. Each trader who deals in cryptocurrencies does so at some level of risk. Since they frequently leverage, cryptocurrency futures traders tend to assume more risks. Your trading balance is impacted, and you might lose all of your cash, if proper risk management procedures are not followed.

Risk management strategies record how you intend to control your threat when investing. They safeguard you against the negatives of your transactions and maintain you in command of your expenses. When the proper crypto trading techniques are already in place, the guidelines will keep you safe and assist you in getting the desired outcome.

8 Principles for Crypto Risk Management:

  1. Have a Good Trading Strategy
  2. Just make investments you can manage to lose.
  3. Measure how much you risk per trade
  4. Restrict Your Leverage Usage
  5. Regularly Determine Your Risk-to-Reward Ratio
  6. Employ stop-loss orders
  7. Protect Your Profit With Take Profit
  8. Possess reasonable expectations

Risk management is crucial for successful trading. Therefore, new and struggling traders should take it seriously. Despite how basic they may appear, failing to implement them might cause you to experience trading difficulties.

Banks are involved in risk management. Regulators appear to ignore this in their efforts to severely curtail the banking sector’s activities related to cryptocurrencies, acting instead on the presumption that “any risk is a bad risk.” It is true that the cryptocurrency market has gone through a very difficult period and that some banks have been hurt. Yet, according to two experts, authorities should ensure that banks take the proper risks.

They claim that the current approach may lead to an increase in risk over time.

The Comptroller’s Office, the Federal Reserve, and the Federal Deposit Insurance Corp. released a succinct public declaration in the first few days of 2023 outlining dangers to banks resulting from activity connected to crypto-assets.

How Federal Regulators Treat Crypto and BanksThe declaration reassures readers that financial institutions “are neither forbidden nor discouraged from providing banking services to consumers of any specified class or kind, as authorised by law or regulation,” as is customary these times for authorities.

Nevertheless, the regulatory authorities mention that they remain in the process of evaluating “whether and how” virtual currency operations can be carried out in accordance with “safety and soundness, consumer protection, legal permissibility, and compliance with applicable laws and regulations,” which is only further supported by more current behaviour by the Federal Reserve.

By dumping any links with companies that deal with cryptocurrencies, regulators require banks to “de-risk”, according to those who are keeping an eye on the changing attitudes and behaviours towards cryptocurrency.

In “Operation Chokepoint,” an intra-agency initiative orchestrated by the Justice Department with help from federal bank authorities, we have witnessed this scenario.

The objective is to stress financial institutions to break off relationships with accepted but unfavourable companies that are thought to increase the risk of fraud and money laundering. The advertising received harsh criticism and was ultimately condemned even by the authorities. Nonetheless, the overall result was to steer respected companies into less trustworthy and open firms that provided financial services.

Keeping Statutory Déjà Vu at Bay:

In the aftermath of the cryptocurrency disasters we saw in 2022, the temptation to circle the financial sector is reasonable, but it is ill-advised. In the near term, retaining innovative, complex technology beyond the governmental purview could feel more secure. Yet over time, then that will increase the danger.

Risk management has historically been an objective of the banking industry

The modern monetary companies that securely store and transmit money and other valuables primarily depend on banks and other regulated financial entities. The technology employed to do specific tasks has significantly advanced from previous times. This will carry on. Thus, reputable, controlled financial institutions must be able to respond to new risks of all kinds and keep supporting the economy.

It is nonetheless far too premature to predict if cryptocurrency will fulfil its aspirations or whether conventional cards and other payment systems or other platforms, will out-innovate cryptocurrency channels, reports from the “crypto winter” aside. Authorities and other federal authorities, however, must avoid prejudging the results. Furthermore, they shouldn’t limit banks’ ability to compete by limiting them to a select few crypto-related markets.

Any other options than Banks?

Banks are knowledgeable actors that have experience running banking systems and managing risks. Do we genuinely desire to exclude all crypto transactions from a sector that possesses the knowledge and responsibility necessary to learn how to perform these things correctly?

Authorities who prevent banking institutions from experimenting safely will limit their contributions, raising the possibility that the system will become divided and financial institutions will be unable to participate in what may turn out to be a crucial component of the current global financial architecture.

Ring-fencing banks from cryptocurrency are not only unneeded, but it is also foolish. Banks are in the business of taking risks, even if these risks might occasionally have very negative consequences. Think about the past as well as the present:

  • Financial institutions have been destroyed by mortgage loans and investments tied to mortgages.
  • Peer-to-peer transactions, real-time settlement, and digital payments all involve a considerable potential for theft, cons, and operational blunders.
  • Presently, there is a lot of uncertainty surrounding commercial real estate financing, a “go-to” for many banks as we assess the effects of the shift from offices to work-from-home and hybrid setups.
  • When credit card and buy-now, pay-later balances increase and customers are already pushed thin by inflation, consumer credit raises the risk curve.
  • Using machine learning effectively has enormous potential for enhancing risk management and customer service, but it takes considerable ability to do so.

Regulatory authorities are not really advocating for banking institutions to be isolated from those operations, though. They anticipate that they will be vigilant in controlling risks.

The True Threat: Crypto? Or Is That Simply the Standard Concentration Risk?

We must admit that the cryptocurrency failures of last year actually managed to have a negative effect on a limited number of institutions. Legislators are likely to consider those occurrences as supporting their strategy. In fact, authorities have already noted previous difficulties at certain banks with a focus on cryptocurrencies as proof that such operations present risks that may be impossible to handle wisely.

How Federal Regulators Treat Crypto and BanksWithout discussing the details, we believe that these instances have less to do with cryptocurrencies as technology and more to do with managing traditional banking risks (such as concentrations and liquidity problems).

Risk Was Not Invented by Crypto:

Unsafe risk concentration has already been an ongoing challenge for the banking industry. It’s also essential to comprehend and continuously monitor structural threats. These problems are complex and not exclusive to cryptocurrencies.

Regulatory authorities should really not concentrate on mitigating risk while supervising cryptocurrency and banks’ engagement in it, as they ought not to in any of these other sectors. Making ensuring banks take suitable risks ought to constitute the goal.

“Appropriate risks” might mean many different things. We interpret this to suggest that individuals should not even incur dangers they do not fully grasp or cannot measure. They cannot handle those risks by necessity.

For the remaining risks, the emphasis should be on limiting excessive risk-taking compared with the strength of a particular institution or the soundness of the financial sector in its entirety.

Several Regulations Prevent Banks from Investing in Bitcoin

Authorities now appear to emphasise that any danger is a risky investment related to crypto-related operations. The most recent intergovernmental advisory is merely the most current in several authorities’ moves indicating banks should avoid cryptocurrency. They consist of:

  • Putting up barriers to stop banks from working on anything related to cryptocurrency without first receiving regulatory clearance or a supervisory nod;
  • Providing accounting guidelines that essentially prevent banks from providing cryptocurrency custodial rights;
  • Implementing international capital requirements that will also subject cryptocurrency-related operations to prohibitive capital costs and limit cryptocurrency commitments to 1% of Tier 1 capital;
  • Providing rigorous requirements for using facilities and master entities at the Federal Reserve Bank;
  • Prohibiting entry on proposed bank charters that include cryptocurrency-related business ambitions; and
  • Neglecting to keep their word after releasing a plan in late 2021 that they would provide more detailed guidelines throughout the duration of 2022 to set more explicit rules of the road for banks.

As 2023 approaches, authorities must be more explicit about the practices that banking institutions can participate in connected to cryptocurrencies and how they can manage the risks. Authorities “simply saying no” to everything related to cryptocurrencies won’t assist banks, the banking industry, or financial stability, as Federal Reserve Board Governor Michelle Bowman acknowledged in a speech. The business requires a balance between what is worthwhile and what doing it “well” actually looks like to accomplish this properly.

Cryptocurrency Taxes

Most cryptocurrencies are convertible digital currencies, as defined by the Internal Revenue Service (IRS). They can therefore be used in place of real money and serve as a trading instrument, a reserve of worth, an account denomination, and a valuation unit.

Additionally, it implies that any earnings or revenue derived from your cryptocurrencies are taxed. But, there is a lot to understand about how virtual currency is taxed because, depending on the circumstances, you might or might not owe taxes.

Knowing when you will be taxed is crucial when you possess or use cryptocurrencies so that you are not taken aback when the IRS arrives to collect your taxes.

Some points to ponder on this subject are the following:

  • Similar to selling a stock in a company, if you make money selling bitcoin, you must incur capital gains taxes on that earnings.
  • You must pay taxes on the distinction between what you paid for the cryptocurrency and its valuation at the moment you used it if you used it to spend on products or services.
  • You must declare bitcoin revenue if you acquire it in exchange for products or services.
  • The worth of your cryptocurrency at the moment it was generated counts as revenue if you mine cryptocurrencies.

In General, When Is Cryptocurrency Taxed?

You do not need to pay taxes to own a cryptocurrency; they are tax-free on their own. For taxation reasons, the IRS views cryptocurrency as ownership, which implies:

  • If you trade in or use bitcoin in a transaction, you must pay taxes. This is due to the fact that if its market price has changed, you will incur capital profits or losses.
  • Cryptocurrency payments made for business purposes are subject to taxation as business revenue.

All the above information is general, but let us take Texas as a specific case.

How Texas handles Crypto Taxes

The Texas legislature just needs to meet in odd-numbered years, so the political representatives really have to take immediate action before the potential to take the initiative is lost.

What is the Big Change in Texas’ Crypto IndustryA proposed bill before the Texas legislature calls for “a master plan for the expansion of the blockchain industry,” which could turn the state into the nation’s cryptocurrency capital by having to introduce tax-free purchasing with bitcoin, amongst many other proposed changes.

Notwithstanding the bill’s uninspired label, it has innovative and intriguing concepts for virtual currencies. The legislature might come up with something slightly more catchy the next time around than “Relating to the founding of a workgroup on blockchain concerns concerning this state.”

Putting aside the jargon of the government, Carla Reyes, an assistant professor of law at SMU Dedman School of Law, presided over the working group and produced some insightful ideas. The study, which offered innovative and exciting suggestions for digital assets, was delivered to the legislature in November.

Texas residents will reap the rewards of a state setting the pace in the blockchain and cryptocurrency industries if the suggestions are implemented during this legislative session. The elected officials must act fast to seize the initiative before it is lost because the Texas legislature only meets in odd-numbered years.

Texas Sales Tax Holiday

A two-year retail sales tax break would be granted for bitcoin purchases received at the point of sale. Everyone likes to save money when they purchase, so this would encourage both customers and retailers to look into digital currencies and set up the appropriate equipment.

Texas businesses that are planning strategically are advancing right now rather than waiting to potentially save money on sales taxes. Since August 2022, the NFL football franchise Houston Texans has accepted cryptocurrencies such as Bitcoin and others as payment for single-game box suites. The Texans are collaborating with a digital banking partner so that they may instantly convert cryptocurrency payments into dollars, but they are not immediately hanging this onto digital assets.

Perhaps businesses would be encouraged to keep onto the bitcoin and use it for their product specifications if Texas did implement the sales tax holiday. This could be the impetus cryptocurrency requires to take off and become a widely used payment method.

Bitcoin as a State Investment In Texas

The group of experts advocated allowing the state of Texas to make direct bitcoin investments to continue the concept of incorporating bitcoin with the state’s payment activities.

Innovatively allowing Texas to retain bitcoin on its balance sheet and using that bitcoin for payments would probably continue to encourage the growth of the state’s virtual currency infrastructures.

Government Mining of Bitcoin

In 2022, three sponsored Ant Miner S9 bitcoin mining rigs were given to the City of Fort Worth Information Technology Department, and the city launched a pilot program. The three machines were upgraded over the year by more potent and energy-efficient Ant Miner S19 units as the effort became significant enough. Carlo Capua, the city’s director of strategy and development, suggested that mining operations continue at the municipal level. Capua did point out that the program was a chance to learn more about the implications and prospects of mining rather than an opportunity for day trading or investing in bitcoin. Due to their endeavour, the working group may have learned more about the possible benefits of bitcoin mining and the energy industry.

Texas’ Tax Incentives for Bitcoin Mining

The suggestions have included a tax break on natural gas that has historically been flared and will be utilised to mine bitcoins as well as a tax break on the sale of energy to significant flexible demands like bitcoin miners.

This win-win proposed solution keeps changing the tax benefits from flaring gas to consuming gas when that gas may be utilised on-site and, therefore, will introduce employment and economic activity to country areas of Texas. The severance tax exemption claims to support an ecologically responsible transformation from flaring gas to using gas on-site in a generation system.

Electricity government subsidies are meant to be a component of the plan for building a robust and resilient system. The suggestion is for the miners to cooperate with ERCOT, which manages the electrical grid in Texas, using a manageable or easily countered load methodology.

Education system of Blockchain in Texas

The Texas Work Group additionally suggested creating a manpower programme that will also help students learn technical knowledge of connectivity, hardware, software, electronic systems, and heating and cooling requirements to equip them to contribute to the expanding bitcoin mining environment.

Texas State Technical College has adopted the workforce program, which plans to have its first genesis class in Q1 2023. The University of Texas A&M has also stepped up to offer a course called “The Bitcoin Protocol” in its 2023 spring semester, focusing more on programming than mining.

The State Of Texas’ Future

Texas is establishing a precedent in the market for digital assets and has no plans to back down. The state’s population will significantly benefit from the sector’s accelerated advancement due to its wide-ranging effects.

It is important to congratulate the tireless contributions of Senator Angela Paxton, Senator Tan Parker, and Congressman Giovanni Capriglione in passing House Bill 1576 and forming a Study Group to figure out how Texas can lead in this regard. As they attempt to get every one of the twenty-five proposals accepted during the current Texas legislature session, Texans and the rest of the world will be monitoring.

Maintaining the cutting edge of technology requires knowledge and abilities beyond the technology teams. It helps to have participants from different business lines participate in the development process, as well as those who left banks for fintech and wish to return. A good question to ask yourself: is your transformation journey hindered by an approach focused solely on technology?

How Citibank, BofA, and JP Morgan Chase Sets Examples in Digital TransformationToday’s banking sector demands agile development of innovative financial products as well as advances in concept and design. According to a Bank of America executive, the fact that “rapid agile” is giving way to “hyper agile” in the planning process at the megabanks, is a sign of the growing urgency.

The change can be seen in how these banks are increasingly taking the lead in the development process in novel ways, with lines of business playing a more critical role than in the past, to reduce the time it takes from identifying a market need to meeting it.

For instance, at Bank of America (BofA), innovation and development projects have been pushed way down to different business organisations, with employees from different functions joining the pool of potential developers.

At JP Morgan Chase, Roman Eisenberg, managing director and the company’s head of technology for digital banking, mentioned that “controlled autonomy” is the bank’s development mantra. With this strategy, lines of business can independently develop their own technologies and fast bring them to market.

Hari Gopalkrishnan, current managing director and head of retail, preferred, small business, and wealth technology at Bank of America believes that a “hyper agile” transformation approach will be the norm of banking in the near future. In this state, he mentioned that anybody in the company could initiate and work on an idea, be able to propose it, test a proof of concept, and integrate that into a business roadmap.

According to Nick Nadgauda, managing director and Global Head of Technology for Citibank’s Treasury and Trade Solutions, the evolving perspective on how and where technological progress should emerge corresponds to the nature of the banking industry itself. He claims that giant financial institutions are highly regulated powerhouses. Given this, they have a closer relationship with nonbank businesses thanks to embedded banking and other new technologies. Offering payment services for a ride-sharing or food delivery app may also involve managing the payment for the gig workers who deliver or drive.

Nick Nadgauda highlighted that this is the seeding point on where the banking industry’s growth was rooted in the past few years, pointing out that it heavily contributes to the pressure banks experience to match the development speed that fintech can provide.

Last December 2022, the three bank executives (Citibank, Bank of America, and JPMorgan Chase) participated in the Tearsheet’s end-of-the-year celebration called The Big Bank Theory Conference. This conference highlighted the exploration of the changing face of the financial institution by bringing the industry’s top decision and opinion-makers to one virtual space. This is where the leading banks, credit unions, challenger banks, and payment firms come to wrap up the past year and get inspired and educated toward the coming year.

How JPMorgan Chase Democraties Tech Development

During the Big Bank Theory Conference, Roman Eisenberg from JPMorgan Chase spoke extensively on its mobile and web applications, which are utilised by more than 60 million customers, and how there were 20 million to 35 million active sessions each day. According to Eisenberg, this includes an “ecosystem” comprising more than 100 items and services, all of which must be able to cooperate. He mentioned that the company’s objective is to provide its consumers with accessible, quick, secure, always-available experiences that fit in the palm of their hands from a complex and risk-averse ecosystem.

How Citibank, BofA, and JP Morgan Chase Sets Examples in Digital TransformationEisenberg highlighted that the company assesses its technological processes in how the consumers utilise them rather than how the company is organised. He mentioned that the ultimate guiding principle that JPMorgan Chase follows for technological advancement is to focus that business on its products.

Usually, the IT department has been a major roadblock for business units trying to launch a new product or thwart a competitor’s strategy. However, this trend dates back decades.

Eisenberg claims that his department’s digital technology unit is aware of the need to avoid becoming a “bottleneck,” as he puts it, that delays necessary reform.

He says that with “controlled autonomy”, the company’s technological mantra, office staff can initiate innovations independently. They do not have to wait for any actions from the digital technology team to do things and move into action. This is necessary due to the demand and pressure to innovate processes and change banking procedures.

“Controlled autonomy” refers to the ability of lines of business to create and deploy new functions and services tailored to their niche markets that integrate with Chase’s whole IT infrastructure. It is a mindset that enables the units to independently launch the most recent iterations of these technologies.

However, setting up technological requirements to be met is necessary to make that happen without producing disruption.

According to Eisenberg, the standards contain a testing approach to ensure the new procedures and services function properly. This expedites the release of software without sacrificing its quality or availability.

To understand the challenge, consider that Chase has 400 engineers for consumer banking products alone, many working independently, across 95 teams. Eisenberg highlighted that this is how the bank can update and add to its mobile capabilities every two weeks, enabling process continuity.

It takes much experimenting, frequently with live experiments, to make new ideas work. According to Eisenberg, these are constructed, employing practices like A/B tests, to give concepts a respectable live tryout. These studies allow the company to swiftly identify ineffective features and roll them back, he added.

Why Bank of America Developed the Erica Chatbot

According to Bank of America’s Hari Gopalkrishnan, the concept of “omnichannel” must be redefined. Today, it has come to mean that, depending on the consumer’s needs, a transaction initiated in one channel, such as online banking, can be easily resumed later whether online or in a branch. Gopalkrishnan believes this is out of date. Customers are no longer drawn to branches as frequently as they formerly were by online functionality friction. Processes can therefore be managed entirely digitally or in a hybrid way.

He mentioned that although consumers could view human interaction as the default option, there is no reason why it can’t be seamless. Because of this, “Erica”, Bank of America’s natural language chatbot, was made to enable the entry of a human agent into a transaction when necessary, but also to enable the return of the consumer to the chatbot dialogue following their intervention. This is comparable to having a live supervisor step in to answer a call centre employee’s query before leaving to let the employee continue speaking with the customer.

Gopalkrishnan claims that Erica is advancing beyond routine banking to help clients with more challenging activities, such as responding to inquiries about things like individual retirement accounts.

He highlighted that every BofA department now has a role in digital transformation. More broadly, seeking out innovation inputs across the company has become increasingly important in developing this capability and the other technological advancements he described.

In Gopalkrishnan’s own words: “We don’t have a set of people sitting in an office in Palo Alto who are the smart people who come up with all the ideas and then tell everybody else what to do.”

He added that BofA holds many patents on concepts rooted outside its technical departments. He claims that the bank conducts “sprint cycles” every quarter, involving up to 1,500 employees globally. In this program, each team has 48 hours to develop an idea and a vote session determines which of the more than 100 addressed have the greatest promise for viability and return on investment.

BofA understood that having technologists alone poses the risk of leaving out crucial components of the process under review, thus participation was expanded. Gopalkrishnan believes that commercialising an idea means including everybody else.

How Citibank Benefits from Fintech Crash

Many financial institutions, both large and small, have found that fintech alliances are essential to their efforts at innovation. Previously, innovation groups inside Citibank’s divisions were responsible for identifying collaboration possibilities and locating the best companies to engage with.

How Citibank, BofA, and JP Morgan Chase Sets Examples in Digital TransformationHowever, as highlighted by Nadgauda, Fintech collaborations lack many breadths, although they have worked to a certain extent.

As a result, Citibank ensures that these initiatives will involve employees from relevant business lines. This process allows the company to produce more innovative ideas and increase exposure to more new partners.

Producing cross-pollination is another concern that most Fintech companies face challenges. Nadgauda claims that many former workers of Citiank are starting to return to the company after being let off from the fintech employment they had previously departed for.

“They’re saying, ‘It looked good. I took a chance. It didn’t work out. Can I come back?’” says Nadgauda. He mentioned that this has been happening for many of their employees and that the company created a special program branding them “returners”.

Nadgauda believes that for many reasons, returning employees from fintech companies are beneficial to the company. “You get people who know the institution, but they now have a little bit of a different perspective and they can bring that perspective with them when they come back”, he added.

On November 11, 2022, FTX, formerly a $32 billion cryptocurrency exchange, filed for bankruptcy. Meanwhile, Sam Bankman-Fried, the company’s former CEO and founder were detained on December 12 in the Bahamas and extradited to the United States. There, he was charged with eight crimes, including wire fraud and conspiracy to defraud investors, for which he pleaded not guilty.

This collapse of FTX has wide-ranging effects on the whole cryptocurrency market as exchanges and cryptocurrencies with exposure to FTX or its native token, FTT, see declining pricing and other financial difficulties.

Up until now, market players have had trouble gauging the extent of its impact and how it will change the sector in the years to come.

What happened to FTX?

The downfall of FTX happened over several days span in November 2022. The turning point came on November 2, when crypto news website CoinDesk published a report that Bankman-Fried’s trading company, Alameda Research, had a $5 billion position in FTT, the FTX native token.

According to the report, Alameda’s investment foundation used FTT, a token created by its sister firm, rather than fiat money or cryptocurrency. That raised questions about Bankman-Fried’s enterprises’ unreported leverage and solvency throughout the cryptocurrency sector.

Below are the key points of the FTX Collapse Timeline:

November 2 to 8: Coindesk Reports and Sell-Offs

  • Sam Bankman-Fried launched the now-defunct FTX cryptocurrency exchange in 2019. He presided as CEO from January 1, 2019, to November 11, 2022. As of November 9, the exchange, which had its own token called FTT, was the fourth-largest cryptocurrency exchange by volume.

What Happened to FTX and How it Can Change the Crypto Industry

  • On November 2, Coindesk released a report regarding Alameda Research, a cryptocurrency trading company that Bankman-Fried also started, and its questionable balance sheet. According to the research, it has FTT is worth billions of dollars as its biggest asset.
  • Changpeng Zhao, popularly known as CZ, the CEO of rival exchange Binance, tweeted on November 6 that he intended to sell out Binance’s stockpile of FTT due to “recent revelations that have come to light”, alluding to the CoinDesk article from November 2 about FTX and Alameda’s muddled money. The collapse of TerraUSD and LUNA in 2022, which wrecked the cryptocurrency market and cost investors billions of dollars, was likened to FTX’s predicament by the speaker. However, such actions usually aren’t made public.
  • Zhao’s revelation caused a sharp drop in the value of FTT during the following day as concerns developed that FTX lacked the liquidity required to support transactions and remain afloat. Other coins, like BTC and ETH, also saw a dip in value as Bitcoin hit a two-year low. In a tweet on November 10, Bankman-Fried reported that $5 billion had been withdrawn from the platform on November 6.

November 8 to 11: Deals and Withdrawals

  • Zhao and Bankman-Fried negotiated an agreement for Binance to buy FTX’s international division. On November 8, the CEOs of the exchanges agreed to a non-binding letter of intent, basically pledging to save the faltering exchange and avert a further market catastrophe.
  • On November 8, FTX stopped all withdrawals from non-fiat customers. FTX’s liquidity problems were explained in a series of tweets by Bankman-Fried, who also promised greater transparency.
  • Binance pulled out of the deal. Zhao said on Twitter on November 9 that Binance has finished its “corporate due diligence” and will not be purchasing FTX. Zhao said in a tweet that his choice was influenced by news stories about “mishandled customer monies” and “possible U.S. government probes.” In a mysterious tweet that ended with the words “Well played; you won,” Bankman-Fried seemed to be alluding to Zhao’s impact on FTX’s decline.

November 11: Bankruptcy Filings and Hacked Reports

  • On November 11, FTX made the voluntary Chapter 11 bankruptcy filing for FTX, FTX.US, and Alameda. In contrast to Chapter 7 bankruptcy, which involves liquidating assets, Chapter 11 bankruptcy enables businesses to restructure their debt and carry on with operations.
  • FTX.US temporarily stopped accepting withdrawals on November 11 when FTX announced its bankruptcy, despite earlier assurances that FTX.US was unaffected by FTX’s liquidity issues. Later, withdrawals were reopened.
  • In an apparent hack, both FTX and FTX.US wallets were emptied on the evening of November 11. According to CoinDesk, more than $600 million was stolen from the wallets. On its help page on the messaging app Telegram, FTX announced the hack, writing, “FTX has been hacked. FTX apps are malware. Delete them. Chat is open. Don’t go on the FTX site as it might download Trojans.” Trojan horses are malware that poses as trustworthy programs.
  • According to a Twitter user, hackers were reportedly attempting to gain access to FTX-related bank accounts. The US. Plaid, a company that links consumer bank accounts with financial applications, blocked FTX’s access to its goods in response to “concerning public reports,” even though they didn’t see any evidence that its tools had been misused illegally.
  • The same evening, FTX general counsel Ryne Miller announced on Twitter that due to the “unauthorised transactions,” or the apparent breach, the business would swiftly move any remaining assets to cold storage

November 12 to Present: The Repercussions

  • The Financial Times released FTX’s balance sheet on November 10; it showed $9 billion in liabilities and $900 million in easily marketable assets. It contained a jumble of entries, one of which was a “secret, erroneously named ‘fiat@’ account” with a negative $8 billion balance.
  • FTX is currently the subject of a criminal investigation in the Bahamas, where the exchange is situated. According to CoinDesk, Bankman-Fried resided there with nine coworkers and romantic partners who assisted him in managing his businesses. Former FTX employees who were questioned by CoinDesk claimed that only this inner circle was aware of the complicated financial situations involving the companies.

What Happened to FTX and How it Can Change the Crypto Industry

  • In a court document submitted to the District of Delaware’s U.S. Bankruptcy Court on November 17, FTX’s new CEO, Ray, gave a pessimistic view of the company’s financial situation. According to him, FTX failed to maintain “proper books or records, or security controls, with respect to its digital assets.”
  • There is “credible evidence,” according to an emergency motion attached to the FTX bankruptcy filing on November 17, that Bahamian regulators gave Bankman-Fried instructions to access FTX monies “unauthorizedly” and transfer them to the Bahamian government. These transactions would have occurred around the same time as the hack, so it’s unknown if or when they occurred. These reports appear to be supported by a news release from the Bahamas Securities Commission.
  • Authorities in the Bahamas detained Bankman-Fried on December 12 in response to a request from the United States government for his extradition because of eight criminal offences, including wire fraud and a conspiracy to deceive investors. The House Financial Services Committee had scheduled a hearing with Bankman-Fried for the next day.
  • Instead of Bankman-Fried, FTX CEO John J. Ray III gave testimony to the House committee on December 13. He stated to MPs that FTX had no record-keeping.
  • Federal prosecutors stated that on December 19, former Alameda Research CEO Caroline Ellison and co-founder of FTX Gary Wang entered pleas of guilty to “charges arising from their participation in schemes to defraud FTX’s clients and investors, and related crimes.” In the FTX case, the two are assisting the government.
  • Bankman-Fried appeared in a New York court on January 3 and entered a not-guilty plea to all of the accusations levelled against him. Due to Bankman-determination Fried’s to dispute the accusations, a criminal trial may occur.

Five lessons the industry must learn from the FTX crisis

The collapse of FTX caused consumers and investors to lose billions of dollars. Still, it also had significant long-term effects, including declining public confidence in the cryptocurrency sector. Entrepreneurs and other people must then inquire how this occurred and what can be done to stop it from happening again. While continuing to explore the limits of Web3, we must commit to addressing dishonest or negligent operators.

Here are the five things that we think the blockchain industry must learn from this crisis:


We need a legal system that can both safeguard users and encourage innovation. The current system of enforcement-based regulation must change. To produce legislation similar to the 1996 Telecommunication Act, which established the circumstances for innovation to flourish responsibly, policymakers and business leaders must collaborate. Any new regulations must distinguish between the technology and the businesses that create the services built on top of it.

Consider the Internet as a model wherein neither network time nor HTTP is governed by anyone. However, we do try to oversee companies like Amazon, Internet service providers like Comcast, and platforms like PayPal that use those protocols.

Policymakers need to realise that excessive centralisation in crypto business intermediaries, which hide their decision-making and financial health from the public, is the real problem in the case of catastrophes like FTX, not decentralisation.

Inclusive Innovation

Let’s not lose sight of what makes blockchain technology revolutionary and concentrate our efforts on creating goods and services that capitalise on its advantages, such as the ability for anyone, anywhere to transfer stores, and manage their assets with one another. Let’s encourage the companies who are attempting to create a better Web and a more open and accessible financial system for everyone. Similar to how the Internet was the first digital informational medium, blockchains are the first digital medium for value.

A digital native asset class is required for payments, savings, and other financial instruments in our digital economy. Instead of complex trading platforms and obscure financial instruments, the next generation of entrepreneurs in this field should concentrate on developing straightforward, user-friendly Web3 applications that appeal to a wide audience and address more real-world issues. Create items that common folks can comprehend and will want and need.


We need to stop idolising the centralised company leaders who founded cryptocurrencies. The truth is that middleware like FTX does not necessarily need to rule the market. The fact that Web3 is open-source and decentralised, allowing anybody, anywhere, to own digital assets, manage them peer to peer, and participate in their governance, is ultimately what makes it so appealing. This was first made possible by Bitcoin, and it has since been greatly accelerated by Ethereum and DeFi applications.

To be truthful, FTX provided a fantastic user interface and experience, but it lacked enough control, improved risk management, and greater transparency. Businesses like FTX have provided crucial on-ramps to this asset class and the larger Web3 market, and they may continue to do so. An industry, however, must not be defined by its entry points. Currently, Binance is responsible for 50% of all volumes in crypto assets. Even while we may praise it today for having survived, everyone should be concerned about concentration like this.

Transition to Public Blockchains

Businesses that thrive to use Public blockchains for Web3 development need more support from the industry. Many large businesses are prepared to switch to Ethereum and other public infrastructure after years of experimenting with closed systems like permissioned blockchains and other closed systems. Although such platforms were unable to add value, they did allow those businesses to become familiar with the technology. Now let’s construct more onramps so they may utilise this public infrastructure for practical, commercial uses.

NFTs are a wonderful place to start because they can “red-pill” a large company on Web3 and pave the way for other developments.

More corporate innovation in this area will benefit Web3 users and developers, but investors will also gain from it. After all, if hundreds of businesses use this technology, they’ll probably need to own the underlying asset as well in order to maintain a node and pay for gas fees, and other costs.

Trust and User Experience

Although self-custody is a feature for certain individuals, we must acknowledge that it is a big barrier to Web3 adoption for others. This indicates that people still require dependable service providers in this area. Many users have a valid fear of holding their assets because the technology tools of Web3 are not intuitive to everyone.

What Happened to FTX and How it Can Change the Crypto IndustryRoneil Rumburg, the founder of Web3 music platform Audius, acknowledges that a self-sovereign crypto user nowadays is possible. However, the accessibility for doing so is still so significant that it’s out of reach for many mainstream users. However, he highlighted that the FTX issue should lead to more time and resources spent on improving the usability of fully self-sovereign, decentralised digital asset management processes.

Web3 developers are creating technologies that are more accessible, but people and businesses, in particular, will still require reliable agents and partners. Behind enforcing industry norms like proof-of-reserve requirements, reasonable laws, and social consensus and collaboration, we may encourage good actors. In other words, we should expose malicious activities when they emerge and stand by those who speak the truth to power.

The goal of Web3 was to eliminate “too big to fail” intermediaries. FTX is exactly what Satoshi Nakamoto, Bitcoin’s creator, was trying to avoid: a centralised organisation that utilised its power to take unreasonably high risks in an unregulated market. Retail ultimately paid the highest price. We need to leave this crisis with a revitalised commitment to regulating centrally controlled financial intermediaries, regardless of the technology they employ, and to create safe, straightforward, decentralised tools using open protocols.

What is FCA?

The Financial Conduct Authority (FCA), which oversees the financial services sector in the United Kingdom, ensures that the financial markets there operate smoothly. Ensuring honest and fair markets for people, corporations, and the economy as a whole is the organisation’s mission. This is accomplished by the Authority through consumer protection, financial market protection, and competition promotion. The United Kingdom Treasury and Parliament have jurisdiction over the FCA.

What does FCA do?

To achieve its strategic goal of protecting consumers and enhancing UK integrity, the Financial Conduct Authority (FCA) has set three operational goals. In the customers’ best interests, genuine competition amongst financial services providers should be encouraged. The FCA was founded on April 1st of 2013, and it took over the Financial Services Authority’s responsibilities for conduct and pertinent prudential regulation. The Financial Services and Markets Act of 2000 established the legislative goals of the FCA, which the Financial Services Act of 2012 altered.

The Act of 2012, which was implemented to guarantee that the financial industry manages and limits risks more effectively in the wake of the financial crisis, significantly altered how financial services businesses are regulated in the United Kingdom.

The FCA website states that the organisation controls the behaviour of 59,000 financial services companies and financial markets in the UK. For people, companies of all sizes, and the economy as a whole, honest and fair markets are the desired outcome. The Authority achieves this by fostering competition, defending the financial markets, and defending consumers. The British Parliament and Treasury are in charge of the FCA.

What can FCA do?

The FCA has broad authority to carry out its mission, including making rules and conducting investigations and enforcement actions. Since the FCA is an independent organisation without government backing, it must be able to increase fees. As a result, the FCA levies fees on approved businesses that engage in activities governed by the FCA and other organizations, such as recognised stock exchanges.

What you need to do to secure FCA  Approval?

At financial services companies, significant responsibilities include heads of compliance [SMF16] and money laundering reporting officers (MLROs) [SMF17]. Many businesses must have senior management function (SMF) holders who have received FCA approval; for example, see SMF16 and SMF17 in The FCA Handbook.

Anyone playing the part of the SMF16 and SMF17 will require the abilities and expertise from training and experience to succeed. Their expertise and skill levels must be commensurate with the firm’s size and risk of harm.

The FCA looks for these qualities to determine a person’s competency before your business submits an application to authorise them for one of these jobs.

Required pieces of training and Qualifications by FCA

The majority of successful candidates will have finished the necessary training before applying. When applicants submit their applications, the FCA is less likely to accept them (even if one intends to after they become authorised).

Essential training entails taking classes that:What are the Requirements for an FCA Authorization

  • applicable to the company’s line of employment for which the applicant is applying
  • recent and current, that is, knowledgeable of the regulations in effect today and what is expected of them
  • Where training occurred years ago, The FCA may inquire if the candidate has since added continuous professional development (CPD) courses to their training.
  • brief “introductory” courses, on their own, do not contain sufficient content or depth to be effective for a head of compliance or MLRO, including the smallest organisations. Detailed enough to provide the person with the expertise to do the function.

The FCA does not support or advocate any training programs or service providers, nor does it specify the format training should take, including traditional classroom instruction, web-based learning, or instructional textbooks and resources. The FCA has discovered that programs that include a test or evaluation are superior for proving that a student has learned pertinent information. If you inquire, we can adequately advise you or, for some courses, set up and conduct training sessions for you.

What can your experience contribute as an applicant?

The Financial Conduct Authority (FCA) is aware of several ways to demonstrate an applicant’s professional experience as an SMF16 and SMF17. Candidates that have previously been hired have a variety of experiences and backgrounds, including work with regulatory and legal departments, attorneys, accounting professionals, and consulting firms.

Although applicants are not required to have previously held the head of compliance or MLRO positions, it might be advantageous if you have held more junior compliance positions, such as regulatory manager or deputy MLRO. The FCA may not approve them. However, it can assist if you have had a position that has previously been approved that is comparable to this one.

Candidates who have only held front-line positions in the past and who have had less exposure and training typically lack the abilities and expertise necessary to hold a governance committee. It could be reasonable and appropriate for the owner or chief executive to do these duties in some small and medium businesses. To guarantee that their company complies with their firm’s pertinent regulations and laws, the FCA still expects those people to have the necessary training and expertise.

Assistance from outside sources, such as regulatory consulting professionals or attorneys

Firms occasionally work with outside counsel, such as attorneys or compliance experts, to help their compliance efforts. These consultants may assist with their application or maintaining their compliance function. Although not required, several businesses find that it facilitates their internal arrangements.

Nevertheless, the FCA will undoubtedly reject one’s application if this kind of outside assistance is the only source of compliance for the company. Any employee at your company who is in charge of a compliance or MLRO role has to be knowledgeable and experienced enough to make judgments about compliance that are pertinent to the corporation, know when to ask for guidance, and know how to put that advice into practice.

How does an applicant’s capacity affect FCA’s Approval process?

Anyone who handles regulation or MLRO duties must devote enough time to them. Those who plan to work on it a few hours a week usually aren’t accepted.

Many companies employ full-time employees to do these tasks. Smaller businesses may suggest that a person performs the function part-time, and the FCA has occasionally agreed; nevertheless, their dedication to the function must be reasonable and adequate.

The FCA will also want to understand potential conflicts of interest if the proposed head of compliance or MLRO has additional responsibilities inside or outside the company. For instance, because one of their duties will be supervising the client-facing business, successful applicants typically exhibit independence from this company area.

The FCA also takes into account the following:

  • Where the candidate will be working; ideally, they will do so from the company’s main office in the UK.
  • Whether the applicant is a top leader inside the organisation, such as a corporate director, since if they aren’t, the FCA may challenge if they possess the incentives or power required to be competent in these jobs, even if they have expertise and skills.
  • The FCA still might seek an interview even if a candidate feels they have the required education or experience.

Please get in touch with us at if you decide to proceed with your application for authorisation or registration.

Financial technology’s success differs significantly, but it has shifted from the periphery of European finance to its centre. The economic gains would be significant if all nations could compete with the best of the best in the area.

The mentioned industry has been severely impacted by the deteriorating macroeconomic situation in Europe and throughout the world, with valuations decreasing and access to capital becoming increasingly challenging. However, when examined over the long run, financial technology companies in Europe continue to grow in power and importance to consumers and the economy. At a minimum, one fintech company is among the top five banks in each of the seven main European nations in terms of gross domestic product (GDP).

Powerful financial institutions provide clients with additional options and flexibility.

In numerous European nations, the financial industry environment is already being modernised with huge kudos to the competition they offer to bank institutions. We concentrate on three crucial facets of Europe’s fintech industry in this piece and the comprehensive research that goes along with it: starting, funding, and scaling, or the ability of fintech to get started, how simple it is for them to obtain finance, and how effectively they can expand and succeed.

Research shows that fintech activity is expanding across all of Europe. However, we also uncover significant discrepancies between the top one-third and the bottom two-thirds of fintech ecosystems in terms of maturity and performance (Figure 1). The United Kingdom and Sweden, in particular, stood out for their outstanding financial technology ecosystem performance.


What are the Opportunities for FinTech in Europe

The advantages might be significant if financial services institutions across all of Europe were able to function at the same level as the finest in the area. Financial technology employment in Europe would increase by a factor of 2.7 to around 364,000, and financing will nearly double to almost EUR 150 billion from EUR 63 billion. Further, valuations would increase by approximately 2.3 to almost EUR 1 trillion — most likely twice the market price of the top ten European banks as of June 2022.

Fintech companies are indeed the driving force behind client happiness, innovation, and development in Europe’s financial services industry.

The financial technology industry in Europe has swiftly advanced from the periphery of the continent’s financial landscape to its centre. There is currently at least one fintech among the top five financial institutions in each of the seven major European nations by Gross Domestic Product (GDP) — France, Germany, Italy, the Netherlands, Spain, Switzerland, and the United Kingdom. Fintechs are defined as financial services organizations (except direct banks) primarily driven by digital technology, were founded after 2000, have received capital since 12 years ago, and have still not attained their full maturity.

The benefits that European fintech provides to clients, the country’s entire financial industry, the continent’s general economy, and civilization as a whole underpin this tremendous rise.

  1. How is it for the customers?

Fintechs are becoming increasingly popular since they provide value by providing improved service at reduced rates. For instance, using financial technology services to perform foreign transfers and stock transactions can result in costs that are only ten per cent (10%) of what traditional banking institutions charge. In seven major European nations, a new retail banking customer study indicated that thirty-two per cent (32%) of participants named cost as their top motivation for using fintech or virtual banks, which is the same number as those who mentioned accessibility (Figure 2).

Figure 2.

What are the Opportunities for FinTech in Europe

Fintech companies often provide clients with financial options they might not have had access to otherwise, such as asset classes like infrastructure funds, private equity funds, and venture capital investments that were previously solely allocated to institutions. Several digital banking companies, such as small and medium-sized businesses, concentrate on historically underserved clientele.

  1. How is it for the financial industry?

Fintechs act as a driver for development and innovative disruption. Fintech companies, with their speed and strength, are well suited to handle numerous emerging financial industry innovations, such as distributed ledger technology (DLT) and integrated finance. With an estimated two to six months marketing time compared to incumbent banks’ 12 to 18 months, they frequently provide new goods and services significantly more quickly. Fintechs are also persistent innovators and leaders in delivering a distinctive client experience and lean banking procedures. Nowadays, several top-tier banks in Europe depend on numerous fintech alliances in various sectors, including operational terms and payment transactions.

  1. How is it for the economy, as a whole?

Fintech firms are significant potential development drivers. Furthermore, in Europe, the industry ramped up its recruiting sector dramatically at a time when incumbent banks in Europe have been cutting their workforces, creating over 134,000 opportunities throughout the continent. Six (6) active start-up hotspots like Amsterdam, Berlin, London, Lisbon, Madrid, and Paris draw international talent. From a value generation standpoint, financial technologies in Europe are estimated to be worth over EUR 430 billion as of June 2022. That exceeds the market value of the seven publicly multinational banks in Europe as of June, 2022.

Financial technology behaviour differs greatly throughout Europe

An analysis reveals significant differences among the financial technology environments in Europe. For instance, Sweden and the United Kingdom (UK) consistently outplay their European counterparts in all important performance categories. A comparison of the success of the fintech ecosystems in the European Union – twenty-seven (27) nations, the United Kingdom, and Switzerland throughout the three growth stages of starting, fundraising, and scaling were conducted in order to analyse overall performance. They were assessed using the five Key Performance Indicators (KPIs). The formation rate using the number of fintech companies per million people in 2021 was calculated.

Two KPIs were used to measure financing: the number of agreements per million people in 2021 and financial technology funding per capita in euros in that year.

The size of the fintech workforce as a percentage of the entire workforce in 2021 and the number of fintech unicorns8 per capita were the final scaling factors the researchers looked at. It was understood that these KPIs do not represent a thorough examination of all elements that may affect performance as a whole. They nevertheless reveal the main advantages and disadvantages of fintech performance.

Figure 3 summarises the performance of the fintech industry using these measures. It indicates a second tier of nations with powerful financial technology industries across most of the dimensions we study, including Switzerland, Ireland, the Netherlands, and Denmark, in addition to clearly demonstrating leadership across all dimensions by the United Kingdom and Sweden. They comprise the top third of fintech performances in Europe and the top-ranked nations.

Figure 3.

What are the Opportunities for FinTech in EuropeEach stage — founding, fundraising, and scaling — shows performance discrepancies.

On completing the pipeline for fintech. There is a sizable discrepancy in the number of fintech companies per million people in a little more than fifty per cent of the European nations. In comparison, Ireland and Switzerland have thirty (30) fintech per million people, while the United Kingdom has 26 fintechs (Exhibit 4). The top five nations (those with GDPs under USD 100 billion) have twenty-five (25) fintechs per million citizens on average.

Figure 4.

What are the Opportunities for FinTech in EuropeOn financing innovation. The largest funding per capita is seen in the European nations that do the best (Figure 5). Per capita financing is significantly lower in underperforming nations like Greece, Poland, and Romania. Hungary, Italy, Poland, and Portugal remain largely underneath their counterparts substantially because the overall amount of money is still inadequate, despite the fact that some nations have been able to boost per capita investment by as much as a factor of six over the previous three years.

Figure 5.

What are the Opportunities for FinTech in Europe

Compared to markets like the Netherlands and France, the financial technology investment growth rate in certain nations – like Germany, Greece, and Ireland — has slowed or declined in recent years. Combining earlier-stage (seed and series A) and late-stage (series B+) per capita investment is dominated by the United Kingdom (Figure 6). With a combined volume of over EUR 1.3 billion for early-stage fundraising and EUR 8.3 billion for delayed financing in 2021, the United Kingdom dominated the European marketing population. This accomplishment compares favourably to other nations, particularly the United States, whose gross domestic product is only approximately four times that of the United Kingdom while being almost ten (10) times larger overall.

Figure 6.

What are the Opportunities for FinTech in EuropeOn Scaling Financial Technology. The incidence of fintech unicorns was examined as a measure to assess the capacity of European nations to develop their fintech ecosystems. With thirty-two (32) unicorns combined — four times more than France and the Netherlands, the next-highest number of unicorn-producing nations — the United Kingdom has the finest scaling record.

Europe versus America: A FinTech Comparison

Comparing Europe and the United States by employing the same three life cycle elements of creation, funding, and scaling is beneficial (Figure 7). With strong representation in the contribution of the United States fintech companies to the economy and workforce, the United States outperforms the European average in all three components and places in the top three across all KPIs.

Figure 7.

What are the Opportunities for FinTech in EuropeSeveral elements might justify why the United States is stronger than the average in Europe. As an illustration, the United States has a sizable domestic market but only one official language and generally unified financial regulations. Taking the venture capitalist (VC) community in general, particularly in the IT sector, improving financing processes from first seed investment up to IPOs, market maturity is also stronger than in several European nations. Accessibility to financing may also be made simpler since institutional investors and US pension funds can give venture capital in prohibited methods in several European countries.

However, our data shows that certain nations, such as the United Kingdom, do better than the United States at the financing stage.

Several variations in ecosystem success across Europe can be attributed to nation-specific market circumstances.

Examining the issues preventing the sector’s performance is necessary to reduce the disparity between leading European nations and those located in the lowest or middle third of the rankings. Here, we concentrate on six variables that might affect the ecosystem and for which changes in approach can have an influence both now and in the future.

  1. On the market’s structural and maturity aspects. These factors may be influenced by historical, cultural, and language dimensions. For instance, having a universally used language, a single currency, and unified regulations might be beneficial. How lengthy a financial technology or larger startup environment has been is one defining feature since markets evolve and adapt with time. The degree by which a newer generation of entrepreneurial founders is blossoming, who can draw on them as instructors, followers, consultants, or financiers, might be another determining factor.
  1. On capital’s accessibility. Financial technology financing in Europe has dramatically grown throughout the past five years, but not consistently. Only about 20% of the funds raised are used for early-stage funding. A third or more of the nations in Europe, most located in Eastern Europe, lacked delayed (series B) funding. Due to stricter laws than in the United States, significant European money pools like retirement funds and life insurance tend not to be fully utilised.
  1. On legal and regulatory environments. France and the Netherlands are two European nations that view their regulatory bodies as crucial development facilitators. However, there is still potential for advancement in the current regulatory frameworks that encourage the creation, expansion, and value of fintech companies. Fintech firms may find new business prospects due to European payment processing system directives for information sharing in the financial sectors. Fintechs will be able to access consumer data from all European financial players thanks to these rules, which will lead to the emergence of new approaches to business. This has occurred in the UK, a pioneer in using public information for finance.
  1. On acquisition and mobility. Not only for fintech companies, but Europe also has significant competency gaps that must be filled. In addition to a general lack of talent, several nations’ complex work permit procedures and visa regulations can also make it difficult to hire talent.
  1. On scaling and internationalisation requirements. Financial technology companies in Europe must be capable of expanding outside of their native markets in order to scale. Language barriers can exist even within one internal market like the European Union due to cultural, legal, and even monetary disparities.
  1. On customer transparency. The spread of fintech companies may be constrained by disparate degrees of virtual maturity, a shortage of internet connections, and other systemic issues in certain nations. Consumers might not fully comprehend concerns, such as those related to data security. Due to their greater degree of public trust than fintech firms, such problems work to the benefit of traditional financial institutions’ benefit. Administrative variations may also play a role in this. For instance, some nations have stricter rules governing consumer protection laws than others.

Finding the positive: the financial technology potential in Europe offers more employment, more finance, and greater values.

What benefits may European financial technology experience if the region’s poorer-performing nations catch up to the top three and if the upper third catches up to the United Kingdom? We have developed a framework for predicting what would emerge to financial technology employment, financing, and assessments if all of Europe’s nations reached the highest per capita levels.

The outcome of this theoretical activity is shown in Figure 8. The total number of employed people might expand by a factor of 2.7 to greater than 364,000, and the countries that are lagging behind the leaders — the “supporter” countries — could see a six-fold boost in employment. With an additional EUR 84 billion worth of investments, the amount of potential funding would increase by a ratio of nearly 2.3. The spending allocation for the upper third of European nations would increase four-fold if raised to the United Kingdom’s threshold, demonstrating the competitive intensity of the United Kingdom. Europe’s total values might increase by around 2.3 times, reaching EUR 981 billion.

Figure 8.

What are the Opportunities for FinTech in Europe

  • A concentrated effort across six major action categories might assist European nations in catching up to giants in the fintech industry.

To catch up with the leaders, middle and low-performing nations will need a clearly defined programming objective. We wrap up by looking at a few of the strategic alternatives that European fintech companies and their shareholders might consider as they expand and strengthen the industry.

  • Encourage the European Union’s economic models to align

In the European Union, progress is already toward the general simplicity and standardisation of scattered local legal rules, enabling financial technology to comprehend fundamental constitutional concepts and concentrate on local particulars. International cultural interaction may help financial companies better grasp important client demands outside of their native markets. Consumers may eventually catch up to an increasingly fully digitised way of life in the meantime.

  • Promote more varied, “homegrown” investment

Policymakers and localised prominent politicians have a significant influence in determining the limitations on investment banks’ accessibility to capital investment. For instance, compared to investing in loans, they could generate larger opportunities for private equity and venture capital securities. It could help to loosen limits on the accumulation of capital organisations’ capacity to invest. For instance, only around ten per cent (10%) of transactions by German insurance companies are presently made in investment options like venturing or independent capital. Still, this proportion is over thirty per cent (30%) in the United Kingdom.

  • Encourage rules and regulations with a creative outlook

The objective is to establish a legal structure that promotes the development and gives businesses the tools they need to succeed both locally and abroad, all while assuring consistency and safeguarding both capitalists and consumers. In this setting, an algorithmic collaboration intended at bolstering fintech ecosystems is particularly crucial. For fintech companies, this might particularly imply reducing the organisational complexity and costs related, adjusting regulatory standards as needed, and improving operational customer-friendliness.

  • Being a draw for international talent

Banks and other financial technology institutions may contribute by providing desirable positions with great growth potential. They can also make a commitment to developing a contemporary workplace culture that caters to a variety of requirements and experiences. For many potential workers, being able to work from home without having to physically visit an office might be a great perk. Politicians and authorities may also promote contemporary business practices in their nations and improve the tax system to attract top international talent.

  • Enabling the success of fintech companies in key markets

Whether all interested parties – from investors and established financial institutions to public players and government entities have their knowledge of foreign markets with the corresponding foreign laws and industry prerequisites in one centralised location, fintechs might be able to make more informed choices about their prospective customer segments.

  • Expand consumer options and accessibility

Fintech companies may be capable of avoiding some compliance issues early on if they place the same emphasis on product security and stability as they do on customer experience. For instance, before investing, they might be more open about investments and the associated risk to clients, going further above current data and customer protection regulations. A Europe-wide effort might be created by political actors and policymakers to make it simpler for fintech businesses to prove their legitimacy to clients.

Financial technology has significantly altered the financial environment in Europe and is now at the centre of it. Customers will profit from the expanded options, and monetary institutions will gain from the greater competition and modernisation. This is however only the beginning; even though just a few nations will already have established themselves as European leaders in the fintech sector, the area as a whole has significant development potential. The benefits for the economy and fintechs themselves might be enormous if nations were to improve to the standard of the area’s top performers. In the upcoming months and even years, it will become crucial for all parties involved — public organisations, well-established actors in the financial institutions, and financial technology pool their resources by creating the institutional framework.

Case Description

COREDO employees were contacted by a client who, for the sake of anonymity, will further be referred to as “Client A”. This client is an electronic money institution authorized to provide payment services, which at the time of applying to COREDO, had not yet started its activities and was interested in developing a complete AML system that would meet all the requirements of regulators and perform its main function — to protect the client’s company from the risk that its services will be used for illegal purposes.

Since Client A did not have any previously configured AML processes or policies, COREDO employees created a complete and effective AML system from scratch.

Risk assessment of the client’s activities and risks associated with the client’s users

The fundamental approach to countering the risks associated with ML/TF is the so-called “risk-based approach”. The main idea is that the competent authorities and financial institutions should identify and assess the ML/TF risks to which they are exposed and take measures appropriate to these risks. In other words, risks are prioritized. This approach helps to reasonably allocate available resources and avoid damage associated with the most likely risks to which the organisation is exposed.

Developing an AML system for Client A, we were guided by a risk-based approach, and therefore, firstly, we carried out a detailed risk assessment. It consisted of the following stages:AML system development from scratch

  1. Determining the scope and structure of the client’s activities.

At this stage, we have received from Client A a detailed description of his business, organisational structure and services that he provides.

  1. Assessment of potential risks inherent in the client’s activities.

We conducted an assessment of the client’s business based on the information received from him, as well as on the materials collected during our research. This assessment included the following:

  • identification of risk factors for the use of products and services of the Client A for ML/TF purposes,
  • identification of risk factors borne by users of Client A’s products and services,
  • determination of the risk appetite, that is, the acceptable level of risk that Client A is ready to take on to achieve his strategic goals.
  1. Determination of risk monitoring and prevention mechanisms.

This stage included identifying and planning the main measures for countering the identified risks and establishing effective protection mechanisms. Taking into account the previously stated wishes of Client A, we offered him the following:

  • To customize the onboarding process, including a methodology for conducting user identification, due diligence, and user risk assessment.
  • To develop a process for monitoring users and their activities during the provision of products and services by Client A.
  • To build a system of interaction between employees of Client A in accordance with the three Lines of Defense model, as well as develop a methodology for training and assessing the knowledge of these employees.
  • To set up methods of external and internal audits, as well as reporting for effective administration by the company’s management.
  • To develop internal AML procedures and policies for Client A to apply the previously listed methods effectively.
  1. Approval of the assigned strategy.

After clarifying all the nuances, the client got acquainted with the results of the risk assessment and approved the proposed strategy for developing the AML system.

Setting up the onboarding process

Onboarding is the process prior to establishing a business relationship with a customer or providing products or services that interest him. During the onboarding process, the organisation has two main tasks: to acquaint the client with the desired product and to “get to know” the client. In the context of the AML field, the primary goal is precisely the second task, that is, getting to know the client using the “Know Your Client” principle.

We set up the onboarding process so that Client A could clearly understand who the user of his product is and what he does, what risks this user may pose for Client A, how and for what purpose he will use the desired product, and where the funds to finance the transaction come.

Collaboration with Client A included the following steps:

  1. Establishment of the methods and tools for user identification.

Since Client A needed to receive detailed information about users, we developed a KYC questionnaire, which is one of the most effective methods for collecting structured data.

We recommend to our customers those identification methods allowed regarding of the AML law in the jurisdiction where their business is registered. In this case, the client was offered a choice of three identification methods: “face-to-face” identification, remote identification and identification using technologies. Client A has decided to use all three methods of identifying users, so we have defined a procedure for each method.

Next, it was necessary to determine which sources of information would be considered valid for confirming the identity of the users, so we compiled a list of requirements for the requested documents.

It is worth highlighting a very important stage of user identification — screening for sanctions restrictions or having the status of a politically exposed person (PEP). Although AML laws usually do not restrict organisations to any specific screening method, we recommend that our clients use special services that significantly speed up and automate the screening process. Therefore, in this case, we offered Client A several services to choose from.

  1. Development of customer due diligence measures.

Due diligence is a set of measures aimed at conducting a comprehensive check of clients for potential risks in terms of ML/TF.

The due diligence methodology for Client A was created in accordance with the risk-based approach, when the higher the potential risk of the user is, the more thorough the check will be and the more documents and information you need to receive. That is, we have developed measures for regular due diligence for low- and medium-risk ML/TF users and enhanced due diligence for high-risk users.

Also, Client A was offered the following due diligence tools:

  • A compliance officer must fill out a questionnaire that serves as
  • a checklist for information about a particular user. It helps to structure the data and conduct a general study of what Client A knows about the user, including a detailed analysis of his activities and sources of funding for these activities. It’s also a great way to archive information for later review.
  • A list of documents must be requested when confirming the available data about the user, as well as a list of other sources of information that can be considered valid for these purposes.
  • Ways to assess the reputation of the users by analyzing various independent sources of information, as well as specialized services for monitoring public information.
  • Web compliance checklist, which contains clear requirements for users’ Internet platforms and helps to assess the compliance of these platforms.
  1. Development of a user risk assessment system.

As mentioned earlier, the choice of due diligence measures is based on a risk-based approach. Therefore, we developed a risk assessment system for individual users .

We proposed to assess risks using a specialized questionnaire that automatically calculates the risk profile of the users depending on the number of points scored. This questionnaire takes into account such risk factors as, for example:

  • the location of the user or the geographical area in which his activities are conducted;
  • type of the activity and turnover of the user;
  • whether the user is a politically exposed person or a sanctioned person;
  • the complexity of the control and ownership structure if the user is a corporate body;
  • the complexity of the distribution channel, etc.

The higher the number of risk factors inherent in the user, the higher his score will be. Further, depending on this score, his risk profile is determined: low, medium and high, or the so-called “reject” — a risk profile upon receipt of which Client A does not a set business relationship with the user and does not provide him with any products or services.

Development of the monitoring methods

The monitoring process consists of two components: monitoring the information about the organisation’s customers, performed through continuous due diligence, and transaction monitoring.

We have provided Client A with outlines of certain scenarios that may arise during a business relationship and the types of checks that should be carried out if they occur. That is, to put it simply, Client A must apply the measures that have been developed if:

  • the user reports a change in the previously declared identification information;
  • the user declares a change in the previously stated activity;
  • the user reports changes in his control or ownership structure;
  • the user shows signs of suspicious behavior, etc.

We have also created a basic set of measures that Client A will use when conducting mandatory continuous customer due diligence following the requirements of the regulators, which must be carried out at regular intervals to update information about the users.

AML system development from scratchAs described above, the second component of continuous user monitoring is transaction monitoring, which includes manual or automated scanning of the transactions based on predefined parameters and scenarios, as well as taking into account certain triggers.

This monitoring aims to determine whether the user’s actual activity matches what is known about him and respond promptly if the client shows signs of suspicious activity.

At the request of Client A, we set up precisely the automated type of monitoring, as well as the corresponding trigger system. Since developing the own monitoring software requires a lot of investment, we suggested that the client uses the services of an existing service that was more accessible to him.

The benefit of this service is that the technical base for monitoring is already ready, but the help of our specialists was still needed in setting up scenarios and triggers that would correctly serve users’ activities, taking into account individual characteristics.

Distribution of the duties and training of the employees

To effectively counter ML/TF, all employees directly or indirectly responsible for compliance with established measures must clearly understand their roles and responsibilities.

We assigned the roles of the Client A employees in accordance with the “Three Lines Model”, or “Three Lines of Defence Model”, which helps organisations coordinate the risk management processes through a clear distribution of their roles and responsibilities. This approach not only improves work efficiency but also helps avoid conflicts of interest, which is one of the most common internal risk factors in AML.

An equally important element is a competent approach to employee training, so Client A was offered a system for training and evaluating new staff, considering their activities and structure. In accordance with local AML law, training must be carried out at least once a year. Therefore, we also offered the client the opportunity to take an annual course with the subsequent certification from COREDO.

Setting up a system of external and internal reporting

A necessary component of any AML system is setting up the organisation’s external and internal reporting. External reporting usually consists of filing a Suspicious Activity Report (SAR) — a notification of suspicious user activity, which is sent to the relevant government authorities.

To fulfill this obligation correctly, organisations need to set up an effective transaction monitoring system and develop adequate procedures that will detail the SAR filing process and, most importantly, signs of suspicious user activity. Therefore, we have incorporated the required information into Client A’s AML policy and included a methodology for identifying suspicious activity and filing SARs in the employee training program. The training included, among other things, the analysis of individual cases from the practice of COREDO employees.

Internal reporting implies the submission of reports on the results of operational activities in the AML area to the organisation’s management. The goal is to inform top management about the current situation to introduce further improvements and, if necessary, eliminate existing shortcomings.

Since there are a several requirements for such reports, the client was offered a template for compiling such reports, and rules that regulate the detail and regularity of reporting were introduced into the AML policy of the company.

Setup of the control system

The basic tools for monitoring the operation of the AML system are external and internal audits that support the organisation’s third line of defence. Internal audit is often carried out by the top management of the organisation (if there is no separate position of an auditor in the company), and external — by an independent auditor. An external audit is necessary to avoid the previously mentioned conflict of interest.

We have created a methodology for conducting internal audits and a template for documenting the results of audits for the client’s management. Also, the client was offered assistance in passing future external audits, including support in passing the check with the regulator.

Development of AML policies and record-keeping methods

The AML policy is a document describing the internal control rules regarding money laundering and terrorist financing and is mandatory for every company whose activities are regulated by AML law. This document is intended as a practical guide for employees of an organisation, so it is often required that the instructions comply with the AML law and describe the procedures established by law. At the same time, the instructions must have the form of an understandable, practical guide. That is, the AML policy is not a formal document.

AML system development from scratchOrganisations often underestimate the role of regulations and develop a template document, which is just an abbreviated citation of legislative acts, without a detailed description of the AML procedures applied. Unfortunately, this approach is incorrect since the prescriptions simply do not fulfill their function.

For Client A, we have created the prescriptions that describe the main elements and processes of the formed AML system and the risk assessment methodology. In addition, we have developed several manuals that regulated individual processes in more detail and had the character of applied instructions for each company employee.

An equally important requirement for the AML systems is the correct record-keeping following the principle of retrospective recoverability — that is, all processes must be documented and stored in such a way that even after a certain period, the reasons for the occurrence and the progress of the process would be clear, it must be understandable which resources were involved, who were the responsible persons, what conclusions were drawn, etc. The more detailed the recreation of the course of certain events can be, the better it is from the point of view of the AML area.

That is why the development of an AML system for Client A included, among other things, setting up a record-keeping system, namely the form of storage (printed, electronic, on cloud storage, etc.), setting up access to this information to avoid disclosure of the personal data, storage period and methods of systematization of the information.

The Client A’s cooperation

A key element in creating a truly effective AML system was the desire of Client A to implement all the proposed processes per our recommendations and subsequent compliance with the established procedures. From the beginning of the cooperation, the client provided us with all the requested information and later actively provided additional information when needed.

After the previously proposed processes were approved, Client A was provided with support in their implementation. We held a series of consultations for the compliance employees, where we analyzed in detail all the steps for interacting with the client at the onboarding stage, in particular:

  • what information and documentation must be obtained from users for correct identification;
  • how to use user screening services concerning sanctions or PEP status;
  • what information and documentation should be obtained during due diligence and how to process this request;
  • how to fill out a due diligence questionnaire, a web compliance checklist and a questionnaire to determine the client’s risk profile;
  • how the above procedures change in case of continuous controls;
  • what is the protocol of actions in non-standard situations, for example, when the user receives the “Reject” status based on the results of the risk assessment, does not want to cooperate, or the information declared earlier turned out to be false, etc.;
  • where and how to keep records of user files.

Also, at the stage of setting up the transaction monitoring system, as mentioned earlier, our specialists offered Client A some options for scenarios and triggers that would signal suspicious activity. During their development, we considered the individual characteristics of the client’s activity and his potential users. During the setup, Client A made his wishes and suggestions, which we always took into account. Then the system went through a series of tests until both the client and our employees were satisfied with the result. After that, staff training was conducted again.

During the implementation of the “Three Lines Model”, all client employees were assigned their job responsibilities and the positions they occupy in certain lines of defence, as well as the functions of these lines. Client A was interested in the effective implementation of this model, so we developed a separate guide for workers to understand its basic principles.

After the launch of the AML system, we actively helped the client’s employees and held regular consultations.

Since the customized processes were implemented in accordance with our recommendations, we provided assistance only with training at first. However, over time, due to external factors, it was necessary to update some processes, so we continued to cooperate with Client A on a long-term basis, gradually updating and supplementing the AML system.

We especially note that the processes developed for Client A turned out to be so effective, among other things, because all our recommendations were fully followed, and the client continues to adhere to them.


Thanks to the fruitful collaboration, the company, which had no previous experience interacting with AML processes or policies, received the full-fledged AML system that includes all the necessary elements. A KYC questionnaire and special methods for monitoring information about clients and their activities were developed and implemented, a system of external and internal reporting, as well as a data storage system, were set up, and all relevant AML policies were developed.

Client A has been cooperating with us for more than two years. Over the years, his business has expanded, and more than a dozen employees have gained knowledge and skills in the AML field. They managed to improve the quality of work and increase the security of the services provided. Thanks to a thoughtful approach, the roles and responsibilities of the staff are clearly defined, which eliminates internal conflicts and increases work efficiency.

Productive cooperation with Client A continues at this time. The constant updating and extension of the AML system allow the company to fully comply with the changing requirements of the regulator to fulfill all AML/CFT requirements and tasks with the greatest speed, efficiency and accuracy.

An employment agreement is a legally binding document that outlines the terms and conditions of an employment relationship between an employer and an employee. It is a crucial document that sets out both parties’ expectations and responsibilities and helps minimise misunderstandings and potential disputes.

In this article, we will provide a step-by-step guide on how to write a good employment agreement, including what to include and how to structure the document.

Step 1: Determine the type of employment relationship

Before you start drafting the employment agreement, it is essential to determine the employment relationship between the employer and the employee. This will largely depend on the nature of the work being performed and the length of the employment term.

Some common types of employment relationships include:

  • Full-time: A full-time employee typically works a set number of hours per week (e.g., 40 hours) and is entitled to benefits such as vacation time and healthcare.
  • Part-time: A part-time employee typically works fewer hours per week than a full-time employee and may not be entitled to the same benefits.
  • Temporary: A temporary employee is hired on a short-term basis to fill a specific need or to cover for an absent employee. They are generally not entitled to the same benefits as full-time or part-time employees.

Step 2: Identify the parties involved

The next step is to identify the parties involved in the employment agreement. This includes the employer (i.e., the company or organisation offering the job) and the employee (i.e., the person hired to perform the work).

It is important to clearly state the names and contact information of both parties in the agreement and any relevant legal entities (such as a parent company or subsidiary).

Step 3: Establish the term of the employment

The term of employment refers to the duration of the employment relationship. This can be a specific period (e.g., one year), or it can be ongoing until terminated by one of the parties.

In addition to specifying the term of the employment, it is also important to include provisions for renewing or terminating the employment. For example, you may want a clause that allows either party to terminate the employment with a certain amount of notice (e.g., 30 days).

Step 4: Outline the job duties and responsibilities

It is essential to clearly define the job duties and responsibilities of the employee in the employment agreement. This includes the specific tasks or responsibilities the employee will be expected to perform and any reporting or supervision requirements.

How to write a good Employment agreementIt is also a good idea to include any relevant job titles or descriptions in the agreement, as this can help to clarify the employee’s role and responsibilities.

Step 5: Specify the compensation and benefits

The employment agreement should include provisions outlining the employee’s compensation and benefits. This might include:

  • The employee’s salary or hourly wage
  • Any bonuses or commissions
  • Any benefits (such as healthcare or retirement plans)
  • Any paid time off (such as vacation time or sick leave)

Specifying the terms of compensation and benefits clearly in the agreement, including how and when they will be paid or provided, is important.

Step 6: Address any potential liabilities

An employment agreement should include provisions addressing any potential liabilities due to the employment relationship. This might include a clause outlining the employer’s liability for any damages or losses resulting from the employee’s actions or stating that the employee assumes all risk for any damages or losses.

Step 7: Include any relevant terms and conditions

There may be additional terms and conditions specific to the employment relationship or necessary to protect the interests of one or both parties. These can be included in a separate agreement section or incorporated into the document’s main body.

Some standard terms and conditions that might be included in an employment agreement include the following:

  • Confidentiality provisions outline the obligations of both party business information confidential.
  • Intellectual property rights: These provisions outline who owns any intellectual property (such as patents, trademarks, or copyrighted material) that is created or used during the employment.
  • Non-compete clauses: A non-compete clause prohibits the employee from working for a competitor or starting a competing business during or after the employment relationship.
  • Governing law: This clause specifies which jurisdiction’s laws will govern the interpretation and enforcement of the agreement.

Step 8: Review and revise the draft agreement

Once you have drafted the employment agreement, it is essential to review and revise the document to ensure that it accurately reflects the terms and conditions of the employment relationship. This might involve soliciting input from legal counsel or other stakeholders or reviewing the agreement against industry best practices or standards.

Step 9: Have the agreement reviewed by legal counsel

It is generally a good idea to have an employment agreement reviewed by legal counsel before finalising it. A lawyer can help to ensure that the contract is legally enforceable and protects the interests of both parties.

Step 10: Finalize and execute the agreement

Once the employment agreement has been reviewed and revised, it is time to finalise and execute the document. This typically involves both parties signing and dating the agreement and possibly exchanging copies or original signed copies.


An employment agreement is a crucial document that outlines the terms and conditions of an employment relationship between an employer and an employee. Following the steps outlined in this article ensures that your agreement is clear, comprehensive, and legally enforceable.

We hope this article has helped provide a comprehensive guide on how to write a good employment agreement. Let us know if you have any additional questions or need further clarification on any of the points covered.

How can COREDO help you?

If you require professional advice in the field, we have the appropriate consultants to help. You may view the services that we can offer through this link: 

There is a high risk of cryptocurrency money laundering because it is no secret that criminals are constantly searching for new ways to tidy up shady cash. As a way of value transfer, it conspicuously rose to be exploited for wrongdoings. Nonetheless, those were the time of care-free trading when there were absolutely zero rules and regulations, and no duties were forced on virtual asset service providers or also called as VASPs.

Advancing to the year 2022 where there are already established overseers such as Financial Action Task Force (FATF) which is an independent inter-governmental body that aims to protect global financial systems against money launderers, European Union’s (EU’s) Anti-Money Laundering Directive 5 (AMLD5) currently the 6th but the 5th put cryptocurrency under control for anti-money laundering (AML) counter-terrorist financing (CTF) purposes. Additionally, the EU’s MiCA initiative mandates registration for AML supervision with the FCA in the UK. As you can see, the industry is seeing significant upheaval from various sources. As you can see, the industry is seeing substantial upheaval from various sources.

The use of cryptocurrency is spreading, and more people are using it for various purposes, including illicit ones. According to recent estimates, fraudsters are increasingly using cryptocurrencies for money laundering. According to Chainanalysis, this usage has grown by 30% annually.

Cryptocurrency has come a long way toward demonstrating that it is here to stay in some capacity, but some problems still require attention. Let’s start a conversation on the risk of crypto money laundering!

What are the risks of money laundering using cryptocurrencies?

To ensure that everyone is on the same page and understands the concept of legalising proceeds of crime, I will provide some background information. The three money laundering processes are typically placement, layering, and integration. Each stage specifies a potential action and how frequently money is cleaned. Each stage is illustrated below, along with a brief description:

  • Step 1 – The money is deposited into the system.
  • Step 2 – Transactions are carried out to conceal the source.
  • Step 3 – The money is reintroduced into the economy.

Above all, whereas other value transfer methods are more suited to certain aspects of the process than others, crypto performs equally well across the board. Now, we’ll go through each step in more detail and describe how either one might be carried out.

Step 1 – Placing crypto to launder money

Risk of cryptocurrency being used to launder money: The greatest breakdown of a three-step procedureIn a conventional meaning, placing refers to placing illegal funds into the financial system.

This phase is a little different if we’re talking about cryptocurrencies because they are neither money nor do they fit into the traditional financial system. Criminals often buy one cryptocurrency to begin money laundering by converting unlawfully obtained fiat currency.

Alternately, random payments can be made directly in crypto, including those obtained from hacking exchanges, defrauding people, and any other type of cybercrime you can think of.

The fact that the initial store of value was gained by unlawful means is crucial in this context. Once crypto assets have been bought, it allows criminals to do additional transactions and exchanges on track to clean their shady money further.

It’s important to note that the person who enabled placement will still have access to the dirty money if this stage uses fiat cash. Therefore, different plans for cleaning it will need to be made. We won’t explain the concurrent process involving fiat coins in this article because we will just be discussing the crypto aspect of things. Just remember that these procedures can happen concurrently.

Step 2 – Layering Crypto

Suppose placement enables criminals to enter cryptocurrency derived from illegal conduct into the crypto sphere. In that case, layering enables them to hide their connection to the proceeds of the original crime and erase their traces. Traditionally, it was accomplished by making many transfers between various wallet addresses. However, since the majority of blockchains are public, this strategy could be more effective because transactions can be easily tracked with the aid of software, so more creative methods are increasingly being chosen. These “ill-witted” criminals often hire services that include private entities such as online casinos, P2P exchanges, centralized exchanges with lax protocols, and many others. The said services make it more difficult to follow the trail that proves that the crypto assets came from unlawful acts.

Step 3 – Integration back into the economic system

Cryptocurrencies can be reintroduced into the system when their origin is obscured. This can be accomplished in a number of ways, beginning with exchanging crypto for fiat currency and concluding with making a black-market purchase. The final step’s main idea is that the criminal can profit from their criminal behaviour. These criminals benefit regardless of how the money is reinvested in the economy, which gives them additional incentive to commit new crimes.

What are the operational details of cryptocurrency money laundering?

Let’s examine a hypothetical example that can potentially be extremely real to show how crypto money laundering actually functions. Consider the scenario if Mark Johnson deceived people by offering a 200% return on investment in exchange for their cryptocurrency, which he would then reinvest in upcoming cryptocurrencies about which he had inside knowledge. Having visibility on social media gave his character more legitimacy. He approached his targets using this channel and posted about his opulent lifestyle. However, it was eventually discovered that there was no such individual and that his persona was clearly a phoney front to entice prospective “investors”. In essence, our criminal collected cryptocurrencies from unscrupulous individuals who were being duped by a con artist named not even Mark but Ian.

Risk of cryptocurrency being used to launder money: The greatest breakdown of a three-step procedureIan’s deception was fruitful; he collected a total of five Bitcoin from different people he conned, but still, he is in a bit of a pickle; Ian cannot use them because he might be found out and be caught by authorities. Being a mischievous-minded person, Ian is aware of how to hide his tracks and decides to start money laundering with cryptocurrencies.

He accomplishes this by transferring laundered crypto assets from his unlisted wallet to a number of wallets he opened using an exchange with a loose know-your-customer policy that only requires an email address to open a wallet for transfers under 20,000 EUR.

When it is finished, he moves the money to five private wallets integrated with mixers to continue his illegal scheme. Naturally, he decides to use the mixer’s capabilities and further obscures Bitcoin’s source (which we all know was laundered from his victims).

Additionally, he performs a payout in five separate batches, equally distributing his laundered assets to the un-hosted wallets. At this point, he decides that he wants to withdraw some of the money. He sends one bitcoin to an exchange with a fiat connection, where he has already completed the know-your-customer and registration processes by providing documents of a friend to whom he paid 1,000 EUR to provide his document and pose for the camera while the checks were being done. Thus, Ian now transfers money to his cryptocurrency-friendly service provider, with which he has an account made in the name of another nominee and uses a card to make any purchases without being concerned that he will be discovered.

What happens if you are caught using cryptocurrencies to launder money?

Ian has cheated others into investing money in his illegal scheme, which is a criminal offence in and of itself. If he is discovered, he will suffer severe consequences. We shall use some examples from the actual world to show it.

For instance, in 2022, Spanish authorities, with assistance from EUROPOL and EUROJUST, acted against a criminal gang that was laundering illicit funds associated with the Magnitsky case, a 219 million EUR corruption case in Russia. Millions of euros are thought to have been transferred via European bank accounts by this money laundering operation before being sent to Spain to buy real estate. The person at the centre of this operation to launder money has been taken into custody in the Canary Islands. Seventy-five properties in total, worth a total of 25 million euros, have so far been confiscated across Spain. Along with the seized properties, those apprehended are now facing heavy persecution.

Close to our crypto topic, another conman in the name of Roman Sterlingov was arrested; he is accused of being the creator of the cryptocurrency mixing service Bitcoin Fog. If proven guilty, he could spend at least ten years in prison.

Similar circumstances can be applied to Larry Harmon, who admitted guilt to a conspiracy to launder money and now faces a maximum sentence of 20 years in prison for running Helix, a Darknet-based bitcoin money laundering firm.

These are all examples of what offenders can anticipate when they are apprehended.

How might COREDO assist you in reducing the danger of bitcoin money laundering?

Money laundering using cryptocurrencies is a serious problem that requires effective solutions to reduce its risks. Such procedures must include duly educated staff people and software programs that improve client screening and activity monitoring. Please contact us if you have any questions about the subject or would like our help putting a money laundering prevention policy in place at your company.

Anti-money laundering (AML) services involve the use of processes and systems to detect and prevent the illicit use of the financial system for the purpose of money laundering or financing terrorism. These services are critical for financial institutions, as well as other organizations that may be at risk for money laundering activities.

Anti-money laundry service outsourcingOne benefit of outsourcing AML services is cost savings. Hiring an external service provider to handle AML tasks can often be more cost-effective than hiring in-house staff or using a traditional consulting firm. This is because outsourcing companies can take advantage of economies of scale and often have lower overhead costs, which can result in lower fees for clients.

In addition to cost savings, outsourcing AML services can also provide access to specialized expertise. Many AML service providers have teams of highly trained and experienced professionals who can provide specialized knowledge and skills in AML compliance and risk management. This can be particularly useful for clients who may not have the resources to hire specialists in-house or who have complex AML needs that require specialized expertise.

Outsourcing AML services can also help to improve efficiency and speed up processes. By outsourcing tasks such as risk assessments and compliance reviews, clients can free up time and resources to focus on more high-value tasks, such as strategy and business development. This can help to increase productivity and improve overall efficiency.

Despite the many benefits of outsourcing AML services, there are also some potential drawbacks and challenges for clients to consider. One concern is the risk of losing control over the quality of work being performed. It is important for clients to carefully select and manage their outsourcing partners to ensure that the work being performed meets their standards and the needs of their business.

Another potential challenge is the issue of confidentiality and data protection. It is important for clients to carefully consider the legal and ethical implications of outsourcing work, particularly when it comes to handling sensitive or confidential information. This may require the use of strict confidentiality agreements and other measures to protect client data.

Overall, outsourcing AML services can be a valuable tool for clients looking to improve efficiency, reduce costs, and access specialized expertise. However, it is important to carefully consider the potential risks and challenges and take steps to manage them effectively.

How can COREDO help you?

If you require professional advice in the field, we have the appropriate consultants for you who can help. You may view the services that we can offer through this link: 

An enterprise service agreement (ESA) is a legally binding document that outlines the terms and conditions of a service provided by a company to another business or organisation. It is a crucial document that sets out both parties’ expectations and responsibilities, and helps minimize misunderstandings and potential disputes.

In this article, we will provide a step-by-step guide on how to write a good enterprise service agreement, including what to include and how to structure the document.

Step 1: Determine the scope of the service

Before you start drafting the ESA, it is crucial to clearly define the scope of the service being provided. This includes the specific tasks or services that will be performed and any limitations or exclusions.

For example, if you are providing IT support services, the scope of the service might include troubleshooting hardware and software issues, installing and configuring new equipment, and providing user training. It might also exclude certain types of support, such as custom software development or data migration.

Step 2: Identify the parties involved

The next step is to identify the parties involved in the agreement. This includes the service provider (i.e., the company offering the service) and the service recipient (i.e., the business or organisation receiving the service).

It is essential to clearly state the names and contact information of both parties in the agreement and any relevant legal entities (such as a parent company or subsidiary).

Step 3: Establish the term of the agreement

The term of the agreement refers to the service’s duration. This can be a specific period (e.g., one year), or it can be ongoing until terminated by one of the parties.

How to write a good Enterprise service agreementIn addition to specifying the term of the agreement, it is also important to include provisions for renewing or terminating the contract. For example, you may want to have a clause that allows either party to terminate the agreement with a certain amount of notice (e.g., 30 days).

Step 4: Outline the payment terms

Payment terms are a vital part of any service agreement, as they outline how and when the service recipient will pay for the services provided.

Some standard payment terms include:

  • Fixed fee: A fixed fee is a one-time payment for the entire scope of work outlined in the agreement.
  • Hourly rate: An hourly rate is based on the number of hours worked by the service provider.
  • Monthly retainer: A monthly retainer is a predetermined amount paid each month for a certain number of service hours.

Specifying the payment terms clearly in the agreement, including the rate or fee being charged and any applicable taxes or fees is important.

Step 5: Include any applicable warranties or guarantees

A warranty is a promise made by the service provider that the services will meet specific standards or specifications. A guarantee promises that the service provider will take specific actions if the services do not meet the agreed-upon standards.

It is essential to include any applicable warranties or guarantees in the agreement, as this helps to protect both parties in case there are any issues with the services being provided.

Step 6: Address any potential liabilities

An enterprise service agreement should include provisions addressing any potential liabilities that may arise as a result of the services being provided. This might include a clause outlining the service provider’s liability for any damages or losses resulting from the services or stating that the service recipient assumes all risk for any damages or losses.

Step 7: Include any relevant terms and conditions

There may be additional terms and conditions specific to the services being provided or necessary to protect the interests of one or both parties. These can be included in a separate section of the agreement or incorporated into the document’s main body.

Some standard terms and conditions that might be included in an enterprise service agreement include the following:

  • Confidentiality provisions outline the obligations of both parties to keep certain information (such as trade secrets or business information) confidential.
  • Intellectual property rights: These provisions outline who owns any intellectual property (such as patents, trademarks, or copyrighted material) that is created or used in the course of providing the services.
  • Force majeure: A force majeure clause protects both parties from liability if the services cannot be provided due to circumstances beyond their control (such as a natural disaster or pandemic).
  • Governing law: This clause specifies which jurisdiction’s laws will govern the interpretation and enforcement of the agreement.

Step 8: Review and revise the draft agreement

Once you have drafted the enterprise service agreement, it is essential to review and revise the document to ensure that it accurately reflects the terms and conditions of the service being provided. This might involve soliciting input from legal counsel or other stakeholders or reviewing the agreement against industry best practices or standards.

Step 9: Have the agreement reviewed by legal counsel

It is generally a good idea to review an enterprise service agreement by legal counsel before finalising it. A lawyer can help to ensure that the agreement is legally enforceable and protects the interests of both parties.

Step 10: Finalize and execute the agreement

Once the enterprise service agreement has been reviewed and revised, it is time to finalise and execute the document. This typically involves both parties signing and dating the agreement and possibly exchanging copies or original signed copies.


An enterprise service agreement is a crucial document that outlines the terms and conditions of a service provided by one business to another. Following the steps outlined in this article ensures that your agreement is clear, comprehensive, and legally enforceable.

We hope this article has provided a comprehensive guide on how to write a good enterprise service agreement. Let us know if you have any additional questions or need further clarification on any of the points covered.

How can COREDO help you?

If you require professional advice in the field, we have the appropriate consultants to help. You may view the services that we can offer through this link: 

Memorandum of Understanding (MOU). A Memorandum of Understanding is a document that outlines the terms and details of a working relationship between two parties. It is often used in business and government to establish agreements for collaboration or outline a partnership’s terms.

Here are some steps you can follow to write a good Memorandum of Understanding:

  1. Determine the purpose of the MOU: The first step in writing an MOU is to determine its purpose. What are the two parties looking to achieve through this agreement? Are they looking to collaborate on a project, establish a partnership, or outline the terms of a working relationship? Clearly defining the purpose of the MOU will help you identify the key points that need to be included in the document.
  1. Identify the parties involved: The MOU should clearly identify the two parties involved in the agreement. This includes their names, addresses, and any relevant contact information. Including a brief description of each party’s role or responsibilities in the agreement is also a good idea.

How to write a good Memorandum of Understanding

  1. Outline the terms of the agreement: The MOU should outline the terms of the agreement in detail. This includes the scope of the agreement, any specific tasks or responsibilities that each party will have, and any resources or support that will be provided. It is essential to be as specific as possible when outlining the terms of the agreement to avoid misunderstandings or ambiguities.
  1. Define the duration of the agreement: The MOU should specify the duration of the contract, including the start date and end date (if applicable). It is also a good idea to include provisions for renewing or terminating the agreement, if necessary.
  1. Include any legal provisions: Depending on the nature of the agreement, you may need to include specific legal provisions in the MOU. For example, you may need to include liability, confidentiality, or indemnification provisions. It is a good idea to consult with an attorney to ensure that you are including all necessary legal provisions in the MOU.
  1. Include a signature section: The MOU should have a signature section where both parties can sign and date the document. It is also a good idea to include a section for each party to keep a copy of the MOU for their records.
  1. Review and revise the MOU: Before finalising the MOU, it is essential to review the document carefully to ensure that it accurately reflects the terms of the agreement and that it is straightforward and easy to understand. You may need to revise the MOU to address any ambiguities or to include any additional provisions that were not included in the initial draft.
  1. Consider using a template: There are many MOU templates available online or through legal resources that can provide a useful starting point for drafting your MOU. These templates often include the standard clauses and provisions commonly included in MOUs, which can save time and ensure that you are not missing any important elements. However, it is essential to customize the template to fit your agreement’s specific needs and terms.
  1.  Use clear and concise language: The MOU should be written in clear, concise language that is easy to understand. Avoid using legal jargon or technical terms unfamiliar to the reader.
  1. Be specific and detailed: It is important to be specific and clear when outlining the terms of the agreement in the MOU. This helps avoid misunderstandings or ambiguities that could lead to later disputes or disagreements. For example, if the MOU includes provisions for the use of shared resources or equipment, be sure to specify who is responsible for maintenance and repair and any usage restrictions or limitations.
  1.  Address potential conflicts of interest: If there is a potential for conflicts of interest between the two parties, it is crucial to address this in the MOU. For example, suppose one party is providing funding for the project. In that case, there may be a conflict of interest if the other party is also responsible for evaluating the project’s progress or success. In such cases, it may be necessary to include provisions in the MOU to address these potential conflicts of interest.
  1. Consider including a dispute resolution clause: Disputes and misunderstandings can sometimes arise even when both parties have entered into an agreement in good faith. To minimise the risk of disputes, it may be helpful to include a dispute resolution clause in the MOU. This clause should outline the steps that will be taken to resolve any disputes that may arise, such as mediation or arbitration.
  1. Review the MOU with legal counsel: Before finalising the MOU, it is a good idea to review the document with legal counsel to ensure that it is legally enforceable and meets both parties’ needs. An attorney can also help identify potential legal issues or liabilities arising from the agreement.
  1. Obtain approval from relevant parties: Depending on the nature of the agreement, it may be necessary to obtain approval from relevant parties before finalising the MOU. For example, suppose the MOU is being entered by a government agency or a non-profit organisation. In that case, obtaining approval from the board of directors or other governing bodies may be necessary.

In conclusion, a Memorandum of Understanding is useful for establishing a working relationship or partnership between two parties. By following the steps outlined above, you can write a good MOU that clearly outlines the terms of the agreement and helps ensure a smooth and successful collaboration.

How can COREDO help you?

If you require professional advice in the field, we have the appropriate consultants to help. You may view the services that we can offer through this link: 

Legal outsourcing, also known as legal process outsourcing (LPO), is the practice of hiring an external service provider to handle certain legal tasks and processes. This can include research, document review, drafting contracts and legal documents, and even litigation support.

Benefits and problematic of legal outsourcingFor clients, the benefits of legal outsourcing can be significant. One major benefit is cost savings. Outsourcing legal work can often be more cost-effective than hiring in-house counsel or using a traditional law firm. This is because outsourcing companies can take advantage of economies of scale and often have lower overhead costs, which can result in lower fees for clients.

In addition to cost savings, legal outsourcing can also provide access to specialized expertise. Many LPO providers have teams of highly trained and experienced legal professionals who can provide specialized knowledge and skills in specific areas of law. This can be particularly useful for clients who may not have the resources to hire specialists in-house or who have complex legal needs that require specialized expertise.

Legal outsourcing can also help to improve efficiency and speed up legal processes. By outsourcing tasks such as research and document review, clients can free up time and resources to focus on more high-value tasks, such as strategy and business development. This can help to increase productivity and improve overall efficiency.

Despite the many benefits of legal outsourcing, there are also some potential drawbacks and challenges for clients to consider.
One concern is the risk of losing control over the quality of work being performed. It is important for clients to carefully select and manage their outsourcing partners to ensure that the work being performed meets their standards and the needs of their business.

Another potential challenge is the issue of confidentiality and data protection. It is important for clients to carefully consider the legal and ethical implications of outsourcing work, particularly when it comes to handling sensitive or confidential information. This may require the use of strict confidentiality agreements and other measures to protect client data.

Overall, legal outsourcing can be a valuable tool for clients looking to improve efficiency, reduce costs, and access specialized expertise. However, it is important to carefully consider the potential risks and challenges and take steps to manage them effectively.

How can COREDO help you?

If you require professional advice in the field, we have the appropriate consultants for you who can help. You may view the services that we can offer through this link: 

A Non-Disclosure Agreement (NDA) or Confidentiality Agreement is a legally binding document that aims to protect sensitive and confidential information from being disclosed to third parties. NDAs are commonly used in business relationships, employment situations, and developing and protecting new products or ideas.

Creating a good NDA is essential to ensure that all parties involved understand the terms and obligations of the agreement and to protect against any potential legal issues.

Here are some key steps to follow when writing an NDA:

  1. Identify the purpose of the NDA: It is essential to clearly define the purpose of the NDA and the specific information that needs to be protected. This can include trade secrets, business plans, proprietary technology, financial information, and other sensitive information. It is helpful to create a list of the specific types of information that will be covered under the NDA, as this will help define the scope of the agreement.
  1. Determine the scope of the NDA: The scope of the NDA should clearly define the parties involved, the duration of the agreement, and any exclusions or limitations. For example, suppose the NDA is being used in an employment context. In that case, it may specify that the employee is not allowed to disclose company secrets to competitors or use the information for personal gain. The scope should also specify exceptions to the agreement, such as information already known to the recipient or information obtained from a third party without the recipient’s knowledge or consent. Determining whether the NDA covers verbal and written communication and electronic communication such as email or text messages is also essential.
  1. Define the terms of the NDA: The terms of the NDA should outline the obligations of the parties involved, including any restrictions on the use and disclosure of confidential information. It is important to clearly define what constitutes a breach of the NDA and the consequences of such a breach. This could include damages, injunctive relief, or other legal remedies. The terms should also specify the agreement’s jurisdiction, governing law, and dispute resolution provisions. If the NDA is being used in an international context, it may be necessary to specify which country’s laws will govern the agreement in case of a dispute.

How to write a good Non-Disclosure Agreement (NDA) or Confidentiality Agreement

  1. Consider any legal implications: It is essential to consider any legal implications of the NDA, including issues related to intellectual property, antitrust laws, and employment laws. It is recommended to seek legal counsel to ensure that the NDA complies with relevant laws and regulations. This is especially important when the NDA is being used internationally, as different countries have different laws and regulations governing confidentiality agreements. It is also important to consider any potential conflicts with other agreements or obligations that the parties involved may have. For example, suppose an employee is signing an NDA as part of their employment contract. In that case, ensuring that the NDA does not conflict with any non-disclosure or non-compete provisions in the employment contract is essential.
  1. Make sure the NDA is clear and concise: A NDA should be written in clear and concise language that is easy for all parties to understand. It is important to avoid using legal jargon or ambiguous terms that could be open to interpretation. It is also helpful to use bullet points or numbered lists to break up the text and make it easier to read and understand. It is a good idea to have the NDA reviewed by legal counsel to ensure that it is clear and understandable for all parties involved.
  1. Please include any additional provisions: Depending on the specific needs of the parties involved, it may be necessary to include additional provisions in the NDA. For example, an NDA may include provisions related to the handling of physical copies of confidential documents or the destruction of such documents upon the termination of the agreement. Other common provisions include provisions related to the return or destruction of confidential materials upon request and provisions related to the confidentiality of the NDA itself. It is also a good idea to include provisions related to the confidentiality of any discussions or negotiations related to the NDA and the use of confidential information to evaluate a business opportunity or potential partnership.
  1. Have the NDA reviewed and signed: Before the NDA becomes legally binding, it is essential to have the agreement reviewed by legal counsel and signed by all parties involved. It is also a good idea to keep a copy of the signed NDA on file for reference. In some cases, it may be necessary to have the NDA notarised or witnessed to provide additional legal protection.

It is also a good idea to review and update the NDA on a regular basis, particularly if there are any changes in the business relationship or the confidential information is protected. This can help to ensure that the NDA remains effective and up-to-date.

In conclusion, a Non-Disclosure Agreement (NDA) or Confidentiality Agreement is a crucial tool for protecting sensitive and confidential information in business relationships and other situations. By following these steps and seeking legal counsel as needed, you can create a strong and effective NDA that serves the needs of all parties involved.

By clearly defining the purpose and scope of the NDA, outlining the terms and obligations of the parties involved, and considering any legal implications, you can create a document that effectively protects the confidential information being shared.

So, having a well-written NDA in place is crucial to protect your sensitive information and avoid potential legal issues.

How can COREDO help you?

If you require professional advice in the field, we have the appropriate consultants to help. You may view the services that we can offer through this link: 

Starting a new business can be an exciting and rewarding experience, but it is also a complex process that requires careful planning and preparation. One of the first steps in starting a business is registering the company with the appropriate authorities. Here is a step-by-step guide on how to register a company, along with some of the benefits and potential challenges to consider.

Step 1: Choose the type of business structure

Before you can register your company, you need to decide on the type of business structure that best fits your needs. Some common business structures include sole proprietorship, partnership, corporation, and limited liability company (LLC). Each type of business structure has its own legal and tax implications, so it is important to consider your specific needs and goals before making a decision.

How to start a new companyStep 2: Choose a business name

Once you have chosen a business structure, you will need to select a business name. This should be a unique name that reflects the nature of your business and distinguishes it from other companies. You may need to conduct a name search to ensure that the name you have chosen is not already in use.

Step 3: Register your business name

After you have chosen a business name, you will need to register it with the appropriate authorities. This may involve filing articles of incorporation or a business registration form, depending on your business structure and the requirements of your state or jurisdiction.

Step 4: Obtain any necessary licenses and permits

Depending on the nature of your business, you may need to obtain certain licenses and permits in order to operate legally. This could include a business license, a sales tax permit, or a professional license, among others. It is important to research the specific requirements for your business and obtain any necessary licenses or permits before you start operating.

Step 5: Set up a business bank account

Once your business is registered, it is a good idea to set up a separate business bank account. This will help you to keep your personal and business finances separate, which can make it easier to track expenses and manage your finances.

There are many benefits to registering a company, including legal protection, tax benefits, and increased credibility. By registering your business, you can establish a clear legal structure and protect your personal assets in case of legal action. In addition, registering a business can also make it easier to raise capital, as investors and lenders may be more willing to work with a legally registered company.

However, there are also some potential drawbacks and challenges to consider when registering a company. One challenge is the cost and effort involved in the process. Registering a company can be time-consuming and may require the assistance of a lawyer or other professional. In addition, there may be ongoing costs associated with maintaining a registered company, such as filing annual reports and paying fees.

Overall, registering a company is an important step in starting a new business. By following the steps outlined above, you can establish a legal structure, protect your personal assets, and increase your credibility and competitiveness. However, it is important to carefully consider the potential risks and challenges and take steps to manage them effectively.

How can COREDO help you?

If you require professional advice in the field, we have the appropriate consultants for you who can help. You may view the services that we can offer through this link: 

A sales and purchase agreement (SPA) is a legally binding document that outlines the terms and conditions of a sale and purchase transaction. It is an essential tool for protecting the interests of both the buyer and the seller and ensuring that both parties understand their rights and obligations.

Here are some key points to consider when writing a good sales and purchase agreement:

  1. Identify the parties involved: The SPA should clearly identify the buyer and the seller and any agents or intermediaries involved in the transaction. Including full contact information for all parties, including names, addresses, and phone numbers, is important.
  1. Describe the property or goods being sold: The SPA should include a detailed description of the property or goods being sold, including any serial numbers or identifying features. If the property being sold is real estate, the SPA should include the address and any relevant legal descriptions. If the goods sold are physical items, the SPA should include detailed descriptions of the items, including make, model, and relevant specifications. It is essential to be as specific as possible to avoid confusion or misunderstandings.

How to write a good Sales and Purchase Agreement

  1. Specify the purchase price: The SPA should clearly state the purchase price for the sold property or goods. This should include any applicable taxes or fees. If the purchase price is subject to contingencies, such as the completion of inspections or the receipt of financing, this should be clearly stated in the SPA.
  1. Outline the payment terms: The SPA should specify how the purchase price will be paid, including any deposit or down payment that is required. It should also define any payment deadlines or other payment-related terms, such as whether the payment will be made in instalments or in a lump sum.
  1. Include any contingencies: Contingencies are conditions that must be met before the sale can be completed. The SPA should specify any contingencies relevant to the transaction, such as the completion of inspections or the receipt of financing. It is important to specify what will happen if the contingencies are not met, such as whether the buyer will forfeit their deposit or whether the seller will have the right to terminate the agreement.
  1. Specify any warranties or guarantees: The SPA should specify any warranties or guarantees that the seller is offering and any limitations or exclusions. For example, the seller might offer a warranty on the property or goods being sold, or they might offer a title guarantee. It is essential to be clear about the terms of any warranties or guarantees to avoid any misunderstandings.
  1. Include provisions for disputes: The SPA should include provisions for how disputes will be resolved, such as through mediation or arbitration. This is important in case any issues arise during the sale and purchase process.
  1. Seek legal review: It is generally a good idea to have a lawyer review your sales and purchase agreement to ensure that it is legally enforceable and meets your needs. A lawyer can help you identify any potential issues or weaknesses in the agreement and advise you on how to address them.

In summary, writing a good sales and purchase agreement involves identifying the parties involved, describing the property or goods being sold, specifying the purchase price, outlining the terms of payment, including any contingencies, specifying any warranties or guarantees, and including provisions for disputes. It is also a good idea to seek legal review to ensure that the agreement is legally enforceable.

By following these steps, you can create a clear and comprehensive agreement that protects the interests of both the buyer and the seller.

How can COREDO help you?

If you require professional advice in the field, we have the appropriate consultants to help. You may view the services that we can offer through this link: 

Benefits and problematic of ISO certificationISO certification is a process by which a company or organization demonstrates that it meets international standards for quality, environmental performance, health and safety, and other areas. There are many benefits to obtaining ISO certification, both for the organization itself and for its customers, stakeholders, and the wider community.

One major benefit of ISO certification is improved efficiency. By implementing the processes and systems required for ISO certification, an organization can streamline its operations and reduce waste, leading to cost savings and increased competitiveness. This can also help the organization to meet regulatory requirements and reduce the risk of non-compliance.

Another benefit of ISO certification is increased customer satisfaction. By demonstrating its commitment to quality, environmental performance, and other areas, an organization can build trust and credibility with its customers, which can lead to increased sales and customer loyalty. This can also help the organization to stand out from its competitors and attract new business.

In addition to these benefits, ISO certification can also have a positive impact on the wider community. For example, an organization that is certified to ISO 14001, the international standard for environmental management, may be able to reduce its environmental impact and make a positive contribution to sustainability.

Despite the many benefits of ISO certification, there are also some potential drawbacks and challenges to consider. One concern is the cost and effort involved in obtaining and maintaining certification. This can be particularly challenging for small and medium-sized organizations, which may not have the resources or expertise to meet the requirements of ISO certification.

Another potential challenge is the risk of non-compliance. An organization that is certified to an ISO standard must demonstrate ongoing compliance with the standard’s requirements. If it fails to do so, it may lose its certification, which can have negative consequences for the organization’s reputation and business.

Overall, ISO certification can provide a range of benefits for organizations, including improved efficiency, increased customer satisfaction, and a positive impact on the wider community. However, it is important for organizations to carefully consider the potential risks and challenges and take steps to manage them effectively.

How can COREDO help you?

If you require professional advice in the field, we have the appropriate consultants for you who can help. You may view the services that we can offer through this link: 

Recent developments in business intelligence and financial technology have significantly altered and enhanced the delivery, accessibility, and range of financial services. Most of these advancements are the result of financial technology companies, or Fintechs, who have pushed traditional businesses to improve how they interact with their clients and communities. However, a lack of regulatory clarity can stifle good ideas and prevent the appropriate safeguards from being implemented to safeguard customers and the financial industry.

Most of the time, authorities have not incorporated technologies into their own regulatory and supervision frameworks, making them less equipped to monitor businesses and practices that are becoming more inventive, inhibiting their efficacy and efficiency. One of the best examples of regulators that embraced and leveraged modern technologies is the FCA.

What is the FCA?

Although it has only been around since 2013, the Financial Conduct Authority in the U.K. (FCA) is often regarded as a global innovator. The agency’s success in pushing innovation has been made possible by a combination of circumstances – a federal initiative to develop London as a thriving fintech hub, a young agency founded in the aftermath of the 2008 economic meltdown with a brand-new and untested mission to encourage financial competition and the concurrent anticipation to advance breakthroughs, a highly focused banking system and dynamic financial technology community, a simple and direct twin peaks economic, regulatory structure, and sustained executive-level support for increasing the agency’s capacity to foster interdisciplinary collaboration.

The FCA and its plans for the fintech industryWhen taken as a whole, these factors allow the FCA to progress its purpose by taking measured risks and pushing the boundaries of regulation.

However, without the FCA employees who collaborated to develop the innovation framework with sincerity, inquisitiveness, boldness, cooperation, and esteem that have illustrated the institution’s innovation practices and have mainly been responsible for advancing it, the agency would not be where it is currently – enabling, and in some cases driving, advancement in the industry and evolving its own potential to monitor and control by using technology and advanced analytics.

Most recently, the FCA’s dedication to financial innovation was highlighted by creating a distinct, autonomous innovation division with over 120 personnel and an additional 40 data engineers integrated with other departments across the organisation.

Project Innovate and the new regulatory Sandbox, as well as the regtech program and its ground-breaking TechSprints, were started and supported by two small, agile start-up teams, and in less than six years, they have grown into the expanding Innovation Division. The group directed 140 businesses through its regulatory Sandbox, provided guidance and active assistance to roughly 700 companies through the Innovation Hub, and formed an international association of regulatory agencies interested in fostering innovation in the public’s interest throughout that time.

The FCA has started incorporating emerging technologies and cutting-edge business intelligence into its own operations using the expertise gathered via a partnership with market players and other stakeholders over the past few years. The agency now has immediate access to a wide range of technical talent and experience that it could not otherwise afford to reproduce, as well as the assurance and motivation to advance on its own, thanks to this close collaboration. Additionally, sandboxes and TechSprints, two collaborative tools the FCA invented to promote and hasten invention, are also being imitated globally.

Aside from these technological advancements, the FCA has also focused on cyber risk reduction, operational resilience, and customer protection.

As the U.K.’s financial industry watchdog, the FCA has also taken over the Financial Services Authority’s responsibility to develop and implement rules as the regulatory body for financial services companies in the region.

In order to achieve its strategic purpose, the Financial Conduct Authority (FCA) has three operational goals: safeguarding consumer interests, preserving and enhancing the integrity of the British financial system, and fostering healthy competition among financial services providers. The agency has broad authority to carry out its mission, including making rules and conducting investigations and enforcement actions. Since the FCA is an independent organisation without government backing, it must be able to increase fees. As a result, the agency levies fees on approved businesses that engage in activities that it governs.

Throughout the years, rules and regulations set by the FCA have tremendously evolved. Recently, the industry has seen huge transitions into more proactive practices.

The transition from reactive to proactive

Although the difference between a reactive and proactive regulator is not formally acknowledged, we can contrast the FCA with other regulators. In a nutshell, a proactive regulator can be perceived with aggressive interventions which check the activities of the businesses it regulates by undertaking different kinds of investigations to avoid anything terrible from occurring, as opposed to a reactive regulator that mainly acts after something negative has already happened.

The FCA and its plans for the fintech industrySuch inspections can take various forms, such as being entirely documentary (where the authority requires the submission of specific reports, information, or documents), on-site visits to assess detailed documentation, processes, or systems, interviewing key employees, or a mix of the two.

Operating a company in a region where the authority is less proactive is considerably more comfortable. For instance, Lithuanian Financial institutions frequently claim that the Bank of Lithuania conducts too many examinations. Non-bank PSPs in Cyprus are required to renew their licenses yearly by submitting specific papers and receiving approval from the Central Bank of Cyprus.

In the U.K., where there are substantially more financial companies regulated than in Lithuania and Cyprus put combined, the FCA had rarely taken an aggressive stance up until these recent years. It is clear that the FCA changed its approach when it began actively writing “Dear CEO Letters” back in 2020 and asking the payment service actors to disclose more information at the onset of the COVID-19 pandemic.

From this, the agency notes that the quality of the documents and data provided by the companies was disappointing. The FCA then kept in touch with even more businesses and conducted more inspections.

Just this 2021, the FCA announced that in contrast to many other more reactive authorities, the FCA agency would adopt more proactive approaches. The FCA then began criminal procedures under its anti-money laundering jurisdiction for the first time in the previous eight years. It was also the first time the agency revoked temporary licenses to stop four E.U. investment firms from selling CFDs to U.K. retail customers and used a freezing injunction to secure several million pounds worth of assets on behalf of customers with final salary pension plans.

Five things to expect from the transition

І. Few businesses are to receive FCA authorisation

According to the FCA’s Business Plan, enhanced digital applications and simpler-to-use forms will make the application process more user-friendly. However, due to a more thorough evaluation and increased inspection of the applicant’s financial and business models, the standards to which the FCA benchmarks the application will increase. Moreover, examinations of the individuals in charge of managing P.I.s/EMIs, which were unfathomable only a few years ago, may start to become the standard. Currently, the FCA frequently undertakes interviews on a case-by-case principle to better examine the important persons than a written communication exchange between the case officer and the applicant business.

The Financial Conduct Authority makes it clear that it anticipates rejecting additional applications for authorisation. When a company is authorised, it requires at least three times more FCA resources to revoke its permits than if the company had never been granted permission. “We will expect denial, withdrawal, and rejection rates to grow initially as we make the gateway more resilient,” the FCA writes in their business plan.

The FCA’s chief executive, Nikhil Rathi, recently appointed Emily Shepperd as the new executive director of authorisations and was given orders to hire about 100 more staff to handle authorisations. As a result, corporations should receive case officers more quickly than they already do, which frequently surpasses three months.

ІІ. Increased intervention and stricter oversight

The FCA plans to intervene more frequently in real time to protect customers and market integrity. In 2021-2022, the FCA was expected to take more supervisory and enforcement actions. Mr Rathi asserts that the FCA will never return to a light-touch, reactive approach.

The FCA acknowledges that the payment industry has transformed rapidly since implementing the Payment Service Directive and the Electronic Money Directive.

While EMIs and P.I.s have advantages for both consumers and businesses, the FCA is worried about the pandemic’s effect on PSPs’ financial power. The FCA’s oversight work will ensure that PI/s and EMIs are financially secure, and it will define companies at risk and contact them proactively. From 31 March 2022 to 31 March 2025, the FCA will evaluate whether payments businesses are willing to keep within their impact tolerances (the maximum permissible amount of interruption to a critical business service) to determine how effective the FCA’s task to optimise the operational resilience of the finance industry has been.

Besides this, there will be greater oversight for newly permitted companies, which the FCA calls ‘a regulatory nursery’ to identify any potential damage to the industry. A firm must submit a business plan when applying for a license. However, a program of operations and a business plan can transform. The FCA aims to ensure that businesses stick to their original plans and that if there is a modification, the FCA is immediately informed and can examine any detrimental impacts. This is a general rule for accredited PSPs, but not many of them were aware that such changes require an alert to the authorities, even though it does as part of the reporting requirements under Principle 11 of PRIN.

ІІІ. Increased requirements and additional supervision

The FCA has consistently raised specifications for non-bank payment service providers in the past few years. The agency ensures FinTech companies maintain operational resilience and customer protection.

The FCA and its plans for the fintech industryIn 2019, for instance, the FCA ensured that the Principles and Chapter 2 of the BCOBS apply to EMIs and P.I.s. It at least implies that P.I.s/EMIs and financial institutions are subject to the same marketing guidelines. The FCA is currently considering creating a “new Consumer Duty,” which would apply equally to a bank and non-bank institutions and would impose additional responsibilities on EMIs/P.I.s to customers.

Registered enterprises must have sufficient funds, liquidity, and reserves to pay pending redress responsibilities, and the FCA wants to ensure the businesses it oversees only shut down on time. The FCA mandated non-bank PSPs to have a wind-down strategy. In March 2021, the FCA announced final guidelines on operation resilience designed to enhance and improve companies’ operational resilience.

The FCA releases more and more recommendations for diverse kinds of businesses. During the pandemic, it released recommendations for payment and e-money firms to bolster firms’ prudential risk management and mechanisms for securing customers’ monies. The agency recently instructed PayTechs to clarify the distinction between preserving e-money accounts and FSCS coverage to clients. It vowed to increase protection and wind-down planning standards through targeted messaging, monitoring EMIs/P.I.s’ arrangements and safeguarding audits.

After its call for feedback in 2020 as part of its Payments Landscape Review, the FCA keeps creating rules and guidelines for payments businesses, and we should expect more and more regulatory standards geared to PSPs.

IV. Cancellation of licenses

The FCA anticipates a short-term growth in the number of companies whose permission will be curtailed by being more aggressive and improving its capacity to detect signals of misbehaviour and act swiftly by suspending or completely revoking licenses.

The agency will target dormant businesses in addition to unscrupulous operators.

There are lots of businesses that do not use their licenses for different reasons. In the best-case scenario, it arises because a firm works as a distributor of an e-money institution or an operator of a payment institution, and, in fact, it does not use its own license. In the worst-case scenario, a corporation employs a “halo effect’ of regulation by leveraging its license to ensure that its uncontrolled activities appear more trustworthy.

The FCA will be more proactive in pursuing a ‘use it or lose it’ strategy by terminating licenses of regulated enterprises that have not begun to carry out regulated practices within 12 months of approval.

V. More transparency from Businesses

The FCA aims to share more information on businesses it regulates, ensure that customers have adequate data to support educated decisions, and reward businesses to enhance their behaviour. The information should include regulatory data previously unavailable to the public, including Financial Ombudsman Service claims and sustain rates. It should be anticipated that FinTech will need to increase its transparency. For example, banks, even neobanks such as Monzo and Starling, are currently forced to share their complaints information, and these requirements are to be applied to P.I.s and EMIs.

Cyber risk is among the most prominent concerns facing the financial services industry today. Following high-profile events like the Equifax leak and the WannaCry ransomware outbreak, G20 finance ministers and central bank governors recognised in March 2017 that cyber risk could potentially disrupt the financial system on a global scale.

The U.K. FCA operational resilience requirementsAs a response, authorities focused on how cybersecurity affects operational resilience. A working group on operational resilience was established by the Basel Committee on Banking Supervision in 2018 with the ultimate aim of “contributing, among other things, to the worldwide effort linked to cyber-risk management.”

The U.K. Financial Conduct Authority (FCA) launched a consultation on several ideas in December 2019, intending to enhance operational resilience within the U.K. finance industry. A couple of months after, the COVID-19 pandemic struck, putting operational resilience under unprecedented stress as cybercrimes in the financial industry rose by 238%.

On March 31, 2022, new FCA rules on operational resilience finally went into effect after a protracted period of consultation, input, and writing. The decision was made at the perfect time, given the growing risk that the cyber threat poses. But it didn’t seem to receive much attention from industry experts, which suggests that many businesses might still be unprepared for the transition.

Now, what does this new regulation cover, and what are the steps that businesses can take to comply with it?


The new Operational Resilience Framework covers banks, investment firms, insurers, building societies, Electronic Money License, Small Electronic Money Institutions, Payment Institutions, Small Payment Institutions, Payment Initiation Service Providers (PISPs) and Account Information Service Providers (AISPs) in the United Kingdom.

As per this regulatory framework, businesses must have finished several tasks, such as identifying “important business services,” establishing “impact tolerances for the maximum tolerable disruption to these services,” and performing “mapping and testing to a level of sophistication necessary to identify important business services, set impact tolerances, and identify any vulnerabilities in its operational resilience” before March 31, 2022. They have three years from that point to guarantee they will always stay within their impact tolerances. After this date, companies seeking authorisation should be prepared with the FCA Operational Resilience Framework Assessment. The deadline for ensuring they stay within their impact limits is March 31, 2025.

In order to build a compliant framework and conduct a resilience assessment, you can follow below simple steps outlined by breaking down the FCA operational resilience framework requirements.

STEP #1. Identify Key Business Services To Ensure Operational Resilience

Regulated companies must recognise crucial business services in the context of their business models per the operational resilience framework FCA criteria. To accomplish this, establish a list of all your services and mark those that must never be interrupted because doing so could affect your clients in intolerable ways or even the U.K. financial system as a whole.

You should consider what might happen to your customers in the short term if the service is unavailable in order to comprehend the levels of harm to consumers that you cannot allow.

For instance, if you offer e-money services to customers who rely on your company as their major provider of payment services, their agony may be greater if the company’s payment card is unavailable than if the currency exchange service is unavailable. It’s crucial to determine whether a particular customer base is more vulnerable than the other, so you should consider this when assessing your customer base. Similarly, you should consider which services may be disrupted and whether doing so could endanger the U.K. financial system’s soundness, stability, or resilience or the efficient functioning of the financial markets.

STEP #2. Recognize How Business Services Can Fail

When a consumer cannot access it or utilise it properly, it is not operational (i.e., it fails). You should make a list of all the processes and potential failure areas that apply to a particular service in order to understand better how it can go wrong. In order for the service to be operational, you also need to determine the human, financial, informational, and technological resources required.

For instance, you have determined that the business service of making payment transfers—e.g. GBP transfers through Faster Payments—causes consumers unacceptable damage if it fails. This service could fail in a variety of ways, some of which are within your control and others of which are not. You might, for example, lose access to a PSP’s API that gives you access to Faster Payments. Another scenario is when your customers cannot access their payment accounts to place a payment order if you solely offer digital payment services. If you only have a smartphone application, it’s possible that your service won’t function if the software (which might be an Android or Apple app) is unavailable because it acts as a single point of failure. However, if your web app is active, it might imply that your payment transfer service is still functional.

STEP #3. Set Impact Tolerance Level

You should pinpoint the stage at which a significant service failure would negatively impact customers in a way that could not be modified or impair the integrity of the U.K. financial industry. As a result, you should know how long you can put up with the service being unavailable.

For instance, a PSP that does not offer a payment card service may believe that if its payment processing service is unavailable for longer than six hours, the harm to its clients is unacceptable, whereas a non-bank PSP that provides a payment card service may believe that if its money transfer service is unavailable for longer than 24 hours, the damage to customers is significant.

Consider the quantity and types (such as vulnerable clients) of your customers who are impacted, their monetary damage, consequences for their lives, their information impacted, your monetary and reputational losses, as well as your impact tolerance when determining what constitutes intolerable damage to customers (critical if your losses might 9impact your ability to provide services or negatively affect the U.K. financial market).

STEP #4. Maintain A List of Methods That Should Be Followed to Prevent, Adapt, And Handle Business Interruptions

After considering numerous failure scenarios for your critical business service, you must decide what steps to prevent each one from occurring. Consider the steps you may take to correct the failure and adjust to it as well. To repair them, you must recognise the human, financial, informational, and technological resources required.

The U.K. FCA operational resilience requirementsRemember to check that your response and recovery scenarios match reality. Note that the only company that can successfully manage service interruptions is prepared in advance. In principle, you could accept payment instructions over the phone if your money-transfer software isn’t working. However, in reality, if you do not even equip your staff on how to take payment instructions over the phone, they won’t be able to do it in case of a service interruption.

Ensure that your company can always stay within the impact tolerance limit by completing the FCA Operational Resilience Framework Assessment. If the FCA audits your company and the tolerance level for money transfer service is six hours, you must demonstrate to the FCA how you plan to ensure that, in the event of an outage, customers won’t be impacted for longer than six hours.

As a result, you or a hired third party should test out circumstances as well as your preventative, adaptability, and problem-solving strategies. As stated in the FCA Operation Resilience Framework policy statement, remember that your resilience must be demonstrated in actuality, not only in concept. Real-world simulations frequently reveal residual hazards and resilience gaps that you may solve.

Important to note that you are entirely accountable for any third parties you use to deliver your services (such as an EMD Agent) and that your operational resilience planning must consider this. Dependent on your interactions with these third parties, you can need them to carry out their own FCA Operational Resilience Framework Assessment or to be considered for inclusion in your firm’s assessment.

STEP #5. Establish Communication Strategies

To lessen the damage inflicted by critical business service failures, you must have internal and external communication methods that can be implemented swiftly and efficiently. You must be prepared to contact the appropriate parties and use the appropriate channels during operational disruption. A thorough escalation procedure and a call tree should also be in place. The FCA also advises considering vulnerable consumers in advance and determining whether you need unique communication techniques to meet their needs.

STEP #6. Develop A Procedure That Enables You to Gain Knowledge From Mistakes And Enhance Your FCA Operational Resilience Framework

In addition to testing your FCA Operational Resilience Framework, a procedure should be in place to ensure that after an operational risk materialises, you would assess your FCA Operational Resilience Framework, taking into account how your company was able to respond to disruption and update the framework.

STEP #7. Do Your Own Research and Review the FCA Operational Resilience Framework

You should review the operational resilience framework you developed at least once a year to see if anything was missed and to take into account any changes to your business model, such as the addition of new services, the use of new software or any other third parties to whom you may outsource specific tasks, the substantial modification of your current service, or alterations to the characteristics of your clientele (e.g., during the last year you could onboard more vulnerable customers).

How can COREDO help you?

If you are in need of professional advice in developing businesses and ensuring regulatory requirements compliance, we have the appropriate consultants for you who can help. You may view the services that we can offer through this link: 

Is the inadequacy or unavailability of any plausible progress in achieving a fundamental agreement with the European Union before the conclusion of the transitional phase on December 31st, 2020, the primary challenge in the United Kingdom’s financial industry? Without a second thought, ever since Brexit, the pandemic caused by CoronaVirus has hindered the development and expansion of Financial technology in London, United Kingdom.

Out of all the European nations, London, which has long been a favourite for the formation of potential Financial technology unicorns, has continued to suffer the most.

Research and studies were conducted on recently authorised and operational payment systems and electronic money institutions (or EMI), small Application Programming Interfaces (or APIs), small EMIs, and Account information services (AIS). Payment initiation services (PIS) authorised institutions in the European Union (EU) from August 2017 up until August 2020 to learn more about what is currently taking shape in the industry.

A EUCLID database, or European Centralised Infrastructure for Supervisory Data, was used for the research. In the mentioned database, the strategy is for the platform to interpret data developed and utilised by the European Banking Authority (EBA) to collect and analyse various financial companies’ regulatory sets of information. It was therefore concluded that in 2017-2018 there were one thousand two hundred twenty-two (1,022 ) ultimately authorised enterprises; in 2018-2019, there were one thousand one hundred and eight (1,108) freshly certified corporations; and in 2019-2020, the number plummeted to five hundred and seventy-eight (578), a shocking forty-three percentage (43 %) decline for licenses and permits of financial technology in the European Union.

Summary of the data on the evaluation and approval of FinTech institutions in the United Kingdom and the European Union both before and after Brexit

Number of newly authorised/registered and operational PSPs in Europe

Fintech, London and Brexit. Is London about to lose its place as the capital of FinTech in Europe

The pandemic brought by CoronaVirus caused a sharp decline in the Gross domestic product (GDP) across Europe, and the pressure on the payment systems industry with a number of emerging payment and electronic money institutions duly authorised historically in 2017 to 2019 were the leading causes of such a significant decrease in new authorisations in 2019 until 2020.

These figures on FinTech authorisations in Europe clearly show that the United Kingdom is the biggest loser. From 2019 to 2020, there were approximately fifty-four percent (54 %) fewer new authorisations in the United Kingdom than there were in the rest of the EU. It was observed that the UK’s share of new authorisations within the EU decreased from fifty-six (56 %) in 2017 to 2018 to thirty-four percent (34 %) in 2019-2020, when we started to look at the percentage of new payments and electronic money institutions legally authorised in 2018 to 2020. There is no absolute doubt that this was not due to CoronaVirus.

United Kingdom’s share of freshly authorised and active EU PSPs

Fintech, London and Brexit. Is London about to lose its place as the capital of FinTech in Europe

Only after the UK represented approximately half, or about fifty percent (50%) of all payment and electronic money (and several other forms of PSP) institutions licensed in the country, however as of August 2020, the United Kingdom’s share is just 31.59% out of 3,843 authorised PSPs. There has been a definite trajectory of a decrease in the UK proportion of incoming licenses and permits of Financial technology institutions throughout Europe. In three years, London’s contribution has plummeted by a staggering thirty-nine percent (39 %).

Time to discuss Brexit and London FinTech

With the unsatisfactory UK-EU trading negotiations findings, something off cliff Brexit is becoming increasingly likely with each passing day, and apart from the inevitable loss of foreign passporting rights, there are other essential aspects to consider:

  • There are nevertheless serious worries that UK financial intermediaries, payment organisations, and electronic money institutions could very well end up losing their involvement in SEPA clearing of SCT, SCT Instant, and SDD even though European Payment Counsel informed its UK participants in the spring of 2019 that they could continue participating in SEPA regardless of what happens of the Brexit agreement on trade-related negotiations.
  • The popular Temporary Permission Regime, which allows European businesses to register and request short-term permission to conduct business in the United Kingdom, will re-open on September 30th, 2020, according to Financial Conduct Authority (FCA). It is still unknown whether the European Union or specific EU member states will implement a similar temporary permission regime for London Financial institutions following Brexit. As of the date of this posting, a few participating countries (such as Poland, Germany, Sweden, France, and Italy) have each passed legislation at the government level that permits access to the common market of specific financial offerings (predominantly wholesale, like making trades in derivatives), though in the occasion of an unfavourable Brexit.
  • United Kingdom’s opinion on the matter after the transitional deal sides makes one wonder. Data security is one of the significant risks, and the Court of Justice of the European countries recently ruled that the United States’ data security standards are not comparable to those of Europe. This decision prohibited information exchange from Europe to America based on the EU-US Privacy Shield. It will actually impact, for example, a European Union firm delivering services in the country beneath the Temporary Permission Regime, given that it will be controlled all at the same by the native country supervisory authority and the FCA. Numerous financial technology enterprises depend on United States IT giants supplying information technology services. In this scenario, which data security framework (EU, UK, or both) should apply to these corporations’ UK consumers’?
  • Will the EBA’s current Strong Customer Authentication and other regulatory technical specifications remain applicable to European businesses operating in the United Kingdom under the Temporary Permission Regime and UK-authorized companies?
  • Regarding the bilateral agreement, the EU attempts to prevent any accord requiring confirmation by the legislative bodies of participating countries. A comprehensive joint venture transaction could be controlled, guaranteeing that certification will be necessary just by the European Parliament and United Kingdom Government. The conclusion of October 2020 is anticipated to be the most likely target date for reaching this consensus. Unless this is accomplished, it is highly improbable that it will be signed into law in time for December 31st, 2020. Nonetheless, in any instance, quite an arrangement would not immediately enable single market access for enterprises that are delivering customer-centric financial services. A whole other alternative choice for the finance industry may be the commission’s particular circumstance mechanism under the known “equivalence regime” (which makes it look at the purpose and impact of the laws and regulation of non-participating states instead of literal imitating) having allowed for the stipulation of some of these offerings to the EU from non-EU countries and vice – versa. Nevertheless, for the similarity to be valid, such a provision must be included in the European legislation governing the specific category of offerings. In this respect, the UK will try to convince the EU Parliament to change just several guidelines for them to allow for the use of equivalence as a basis for argument. Even this final option has limitations because the equivalence determination may be revoked at any time and because, like the trading relationship, it is likely to be unsuccessful for retail financial institutions.

Effects on the FinTech industry in the EU and the UK

It is apparent that significant financial technology enterprises both in the United Kingdom and European Union have already secured additional authorisations, whether in the EU or UK correspondingly. Unfortunately, most medium-sized and small-sized payment and electronic money institutions across the UK and EU countries have still not attained the off-the-cliff Brexit.

Fintech, London and Brexit. Is London about to lose its place as the capital of FinTech in EuropeThe timetable of the trade deal negotiations sounded ambitious back in the year 2017, and able to look back now from Covid – 19 toughest-hit European countries; it seems most unrealistic today. The sectors of the economy of the UK and the EU are so intertwined and dependent on one another that it seems impossible to dismantle what has been built over nearly fifty (50) years in an orderly fashion.

Payment and electronic money institutions in the UK and the EU should obtain the necessary rulings and regulatory authorisations in either the EU or the UK as an endorsement of the transitional phase beyond December 31st 2020, is highly improbable. This will help these institutions avoid political uncertainty and regulatory restrictions and maintain compliance throughout these challenging times for the industry.

You can schedule a free initial consultation with COREDO experts to get guidance on regulatory licenses and permits in either the EU or UK if you are a FinTech company beginning to wonder how to remain in business in either the EU or the UK (London) after Brexit while remaining compliant with the regulatory requirements.

Since its introduction in late parts of 1990, the utilization of electronic money, or e-money was seen to increase with an exponential growth. This is evident on Figure 1 below:

Beneath the Surface of Banks versus Electronic Money Institutions

One particular scenario was in the United Kingdom, having four percent (4%) of the country’s adult customers to use e-money as a payment method. Statistically, this is a three-percent (3%) increase as evaluated by the Financial Conduct Authority (FCA). Although this is a growth in nature, evidence shows and suggests that it is possible that most of these users do not really know that they are paying through electronic money, and they have minimal knowledge in differentiating e-money and deposits – and that of Electronic Money Institution (EMI) versus Bank, as a whole – regarding the security they are privileged with when it comes to the issuer’s inability to pay off debts.

The Financial Conduct Authority noticed this not long ago, and realized that they needed to publish an official letter to the Chief Executive Officers (CEOs) of existing EMIs requiring them to be straightforward in educating their customers and clients about the difference between the mentioned methods.

Because of this issue, it is just right to provide more information about the topic and that is through this article. We will provide clarifications on the difference between deposits and electronic money from the customers’ point of view considering how traditional banking institutions and EMIs utilize and protect the customers’ funds and where these funds are being kept. Now, we can say that the EMI versus bank difference in terms of their balance sheets may be the deciding factor between e-money and deposits.

For those who have deposits and electronic money funds, and the EMIs, both established and new players in the e-money market, should find this article to be enlightening.

Who are the issuers of deposits and e-money?

The creation of an obligation (such as a debt) on the issuer’s balance sheet is the common understanding of issuance. Similar to how an institution that issues corporate bonds has a debt obligation on its balance sheet, an individual can have a mortgage loan liability, or a debt to the bank comes twenty to thirty years in time, whether they are aware of it or not. Deposits and electronic money are issued by the same entities that issue all other financial products.

Further, deposit issuance, frequently known as “acceptance,” is a tightly controlled operation mostly limited to financial institutions. According to the study by the European Banking Authority (EBA) in 2014 entitled “Report to the European Commission on the perimeter of credit institutions established in the Member States”, understanding that just a number of credit companies provide deposits are essential, and the same goes with the concept that just a number of credit companies issue deposits.

Regarding the first conception, certain credit companies are considered “credit institutions” even when they do not offer deposits but issue “other repayable funds” and give credits on their own funds.

Regarding the second conception, post office giro institutions (POGIs), usually referred to as “postal banks,” are a suitable example because several of them are known to be able to take deposits. This is according to the Article 1 (2) of Regulation (EU) No 1074/2013 and EBA in 2014, although they do not meet the criteria of being a “credit institution” in many nations.

Full-service banks, lending institutions, mortgage banks, savings banks, and post office savings banks are some firms that make up the European Union’s credit institutions sector. In Figure 2 below, you can see how each country contributed to the total number of legal institutions or entities (on the left) and assets (right).

Beneath the Surface of Banks versus Electronic Money Institutions

The types of companies that carry out electronic money issuance are more varied than those that carry out deposits. Electronic money providers are listed below:

  • Electronic Money Institutions, or EMIs;
  • Credit institutions (that is, banks);
  • Post office giro institutions (also known as “postal banks”, such as the Post Office in the United Kingdom); and
  • Countries’ central banks and public authorities at times when they are not serving as either a monetary authority or other public authority.

The larger parts of e-money sector are actually issued by credit institutions, which are a subset of monetary financial institutions (MFIs), as seen in Figure 3:

Beneath the Surface of Banks versus Electronic Money Institutions

To put it in another way, as of right now, sight deposits and electronic money coexist on the liabilities side of the balance sheets of credit institutions.

For several instances, organisations that may have initially qualified as Electronic Money Institutions are ultimately given the deposit-taking license, joining the monetary financial institutions’ industry.

Revolut Ltd. is one illustration of this, since it has used its banking license from Lithuania to provide protected deposit accounts in Bulgaria, Croatia, Cyprus, Estonia, Greece, Latvia, Malta, Romania, Slovakia, and Slovenia but not in the United Kingdom, where it still conducts business as an EMI.

Bank versus Electronic Money Institution: A Balance Sheet Comparison

It is required to first eliminate a common misconception about the nature of a current account to be able to recognise the distinction between the mentioned financial products and the subject of Electronic Money Institution versus Bank.

Following a poll done in Austria in 2020, sixty-eight percent (68%) of the two thousand (2000) survey participants think that bank savings and currency are guaranteed by gold. In 2009, a different study of two thousand (2000) Britons found that seventy-four percent (74%) of participants believed they were the rightful owners of the funds in their current account.

Both concepts are demonstrably untrue. Legal literature has long recognised that bank deposits are really loans to banks. In this sense, the word “deposit” might be deceptive since it implies relatively secure supervision, disposition of property, or reliance.

However, the deposit contract is often written such that the bank does not retain the depositor’s cash in custody; the monies are not set aside or designated. Instead, the bank is free to utilise the money however it sees fit and to mix (that is, commingling) them with its own funds as long as it returns the same amount to the depositor. That seems to be, the contrast between an electronic money institution and a bank is where the matter eventually comes down to.

As a result, when a depositor places funds in a bank, that individual is not the actual proprietor of that money. They are only one of the many customers the bank is in debt to.

The money a person has in an account with a creditor is the money that the company owes that person. It gives you a guarantee to pay it back, and that assurance is what our culture refers to as “money”.

Let us now look into the perspective of Electronic Money Institutions, or EMIs. In this respect, they are rather comparable since electronic money is both a credit claim made by the holder against the electronic money institution and a debt obligation made by the institution to the electronic money account holder. For efficient purposes, society is considering electronic money to be comparable to deposits from banks since both are utilized as payment methods for their purchases. The Electronic Money Institution guarantees to reclaim or move the money being demanded, just like how banks do it.

Looking at another crucial part of the industry, bank deposits and electronic money differ in one another, and the cause is how lending companies and electronic money institutions permit their balance sheets to be set up.

The unique characteristic of lending firms versus Electronic Money Institutions can be seen on the concept that even though lending firms can be mix the accounts provided by their clients with the companies’ own money, and even use both for their benefit (such as granting loans on their own funds), EMIs are required to separate their companies’ funds’ to that of their customers’, hence, keeping them segregated. Yes, Electronic Money Institutions can get a hold off their customers’ funds, nonetheless, they are not allowed to use it for their own objectives aside from pure business transactions like those that involve issuing and claiming of electronic money.

Meaning, in real life scenarios wherein banks keep one pound (GBP 1) in account (that is money reserves in central banks, or “nostro” account balances with other banking firms) for each ten pound (GBP 10) of electronic money debts (or usually noted as Fractional reserve banking, which means that a bank are permitted to use funds that would be unutilized or stagnant in order to gain profits through interest rates on new credits), Electronic Money Institutions should safeguard ten pound for each issued GBP 10 electronic money liabilities (in this case, they are required to keep a constant one is to one proportion or “parity”). This ruling is based on Articles 21 and 22 of The Electronic Money Regulations 2011 and Article 7(1) of Directive 2 Articles 21 and 22 of The Electronic Money Regulations 2011 and Article 7(1) of Directive 2009/110/EC009/110/EC.

In addition, contradictory to lending institutions in terms of deposits, Electronic Money Institutions are not permitted to allow loans from the accounts accepted in trading for e-money, and in case they do so, it should be a support and allowed only for those whose connected in performing the actual payments. This is stated in Article 32(2) of The Electronic Money Regulations 2011 and in Article 6(1) of Directive 2009/110/EC).

The explanation could be more understandable when you look at and compare the balance sheets of Electronic Money Institutions (on Figure 4) and credit firms (on Figure 5). A more restricted balance sheet is visible on EMIs’ than that of credit institutions’. It is required to have a parity to be maintained between electronic money obligations and safeguarded assets and this will bring them forth a lesser space for having other entries on the company’s balance sheets.

Beneath the Surface of Banks versus Electronic Money Institutions

As previously stated, for each one pound worth of electronic money issued to clients, they must keep one pound in assets that are safeguarded and segregated from their company’s account. Usually, Electronic Money Institutions maintain protected accounts across other lending companies or even central banks and sometimes invest in a more liquid asset. It is also highly probable that there are instances wherein they utilise insurance to safeguard funds. Such a strategy is more known as “PSD Bond”.

Taking in the fact that by law, lending companies are permitted to allocate money from their customers, that amount can be utilised to fund more loans and can exit the banks, and are even replaceable by greater-yielding assets such as loans (such as transactions from banks, receiving deposits and payment of deposits at a lower rate than what they normally charge their lenders on credits). Figure five (Fig. 5) below is an illustration of what a balance sheet of a credit institution may look like:

Beneath the Surface of Banks versus Electronic Money Institutions

In opposition to the situation of Electronic Money Institutions, the money owed by credit institutions to their creditors are largely supported by less liquid loans and just a minimum of liquid assets. Without any special support from the central bank, banks would not be able to fulfill their pledge to restore customers’ money even if they wanted to urge their banks to do so (letting them borrow reserves from central banks or cash from vaults on large amounts of volumes and more flexible terms).

On another note, Electronic Money Institutions have enough money on hand to cover a hypothetical unexpected demand for money withdrawals or transfers from all of their clients.

Here, things get a little more difficult because of where Electronic Money Institutions keep the money. The answer is, frequently, credit institutions (or banks) do not maintain an exact matching amount in funds that are similarly liquid (say for example with the central bank). The question of whether a client would lose the money stored in their electronic wallets if the bank where the Electronic Money Institution stores its secured cash failed is a source of significant debate (that results in insolvency).

According to the assessment, those who own electronic money carry out to lose funds since the Financial Services Compensation Scheme (FSCS) does not apply to deposits made by financial institutions (including EMIs) with credit institutions (take into consideration that even if these deposits were protected, the protection would be ineffectual because they are only protected up to a maximum of eighty-five thousand pounds (GBP 85,000) and EMIs sometimes retain millions of dollars in client cash in pooled accounts.).

In any case, the fact that Electronic Money Institutions have all the funds necessary to meet a hypothetical unexpected demand from their clients in withdrawing or transferring money, and that in the event of being insolvent, these finances would be accessible to be dispersed to e-wallet owners, may help to partially describe in detail how it was that, in contrast to e-money, bank deposits are generally virtually assured by the country’s administration. The Financial Services Compensation Scheme (FSCS) in the United Kingdom provides depositor protection for sums up to GBP 85,000. This is again another distinction between a bank and an electronic money institution.

How about financial firms that print both paper money and electronic money? This is a somewhat uncommon matter, and not much has been published about it. According to the study, when credit institutions issue electronic money, separation restrictions are not applicable under United Kingdom legislation (neither, as was previously noted, when they make deposits) – they are solely applicable to banking institutions and electronic money institutions.

In the European Union (EU), not many banks issue electronic money, and their balance sheets are not well-documented either. There are several occurrences, though. Taking this as an example, studies have shown that the Luxembourg Commission de Surveillance du Secteur Financier (the “CSSF”) permitted PayPal to utilise thirty-five percent (35 %) of the cash deposited to be electronic money holders to give credit. PayPal has a banking license in Luxembourg but seems to issue e-money solely.

Researchers may imagine that the balance sheets of lending institutions that generate simultaneous deposits and e-money could resemble anything like this based on the scant data in Figure 6.

Beneath the Surface of Banks versus Electronic Money Institutions

Result of Debate: E-money versus bank deposits

While deposit and electronic money loans (a guarantee to reimbursement on trend) issued by lending institutions are supported by borrowings and, to a lesser degree, bunker cash and reserves with the central bank that the credit institution is, electronic money obligations (another promise to full payment on trend) issued by electronic money institutions are supported on the financial assets of their balance sheets by an equivalent size of funds secured by the electronic money institutions in funds with lending institutions.

However, debts or obligations are not liquid enough, and creditors can fail to pay back a debt according to the initial agreement (or default). Depositors are likely to lose revenue if a bank fails due to widespread loan defaults because they are general lenders to companies. When these two financial products are established by the identical business, the very same guidelines are applicable.

How can COREDO help you?

If you are a beginner in the industry or a current Electronic Money Institution and have questions about Electronic Money Institutions vs. Banks, you might wish to contact our team at COREDO. You may visit our website at

Additionally, we can assist you in comprehending the practical and legal facets of safeguarding, securing accounts, and the e-money issuing industry more broadly. We are here to guide you not just through the intricate licensing process for electronic money institutions but also to assist you in comprehending how to grow your e-money company.

A high-risk country: what is it?

High-risk countriesA high-risk country is a jurisdiction that poses a significant threat to the global financial system due to the fact that it does not sufficiently implement, or does not implement measures to counter money laundering and terrorism financing.

The information in this article applies only to the activities of companies registered and operating in the Czech Republic. At the same time, 90% of the information applies to other EU jurisdictions.

Section 9(1)(a)(3) of Act No. 253/2008 Coll., on Certain Measures against the Legalization of the Proceeds from Crime and the Financing of Terrorism, states that the countries that should be considered high-risk are those that are recognized as such by the European Union regulation or for any other reason.

The normative act which is directly applicable on the territory of the European Union is the Commission Delegated Regulation (EU) 2016/1675 of 14 July 2016 supplementing the Directive (EU) 2015/849 of the European Parliament and Council. It explains how and for what reasons a country may be listed as a high-risk country.

The Financial Analytical Office (FAÚ) also considers important the list of high-risk countries that has been compiled and published by the Financial Action Task Force on Money Laundering (FATF).

High-risk countries: lists

When determining whether a particular country is among the jurisdictions with a high level of risk to the financial system, it is recommended to be guided by the following lists:

FATF lists. This influential intergovernmental organization has created two lists:

  • a blacklist that includes high-risk countries that require a call to action. The countries on this list are characterized by serious AML/CFT deficiencies that pose a direct threat to the international financial system.
  • a grey list that includes countries under enhanced monitoring that actively cooperate with the FATF to quickly eliminate existing shortcomings in the field of AML/CFT.

The list of the European Commission, which in many aspects duplicates the mentioned FATF lists. It is annexed to Regulation (EU) 2016/1675 supplementing Directive (EU) 2015/849.

All these lists are mandatory for individuals and companies that are obliged to comply with the principles listed in the AML/CFT Act. They are encouraged to apply enhanced measures to customers originating from countries included in one of the mentioned lists.

The consolidated list of high-risk countries according to the FATF and the European Commission as of October 21, 2022 is as follows:

  • Afghanistan (AFG) – included in the list of the European Commission
  • Albania (ALB) – included in the FATF list
  • Barbados (BRB) – included in both lists
  • Burkina Faso (BFA) – included in both lists
  • Philippines (PHL) – included in both lists
  • Gibraltar (GIB) – included in the FATF list
  • Haiti (HTI) – included in both lists
  • Iran (IRN) – included in both lists
  • Jamaica (JAM) – included in both lists
  • Yemen (YEM) – included in both lists
  • South Sudan (SSD) – included in both lists
  • Jordan (JOR) – included in both lists
  • Cayman Islands (GYM) – included in both lists
  • Cambodia (KHM) – included in both lists
  • North Korea (PRK) – included in both lists
  • Mali (MLI) – included in both lists
  • Morocco (MAR) – included in both lists
  • Myanmar (MMR) – included in both lists
  • Nicaragua (NIC) – included in both lists
  • Pakistan (PAK) – included in both lists
  • Panama (PAN) – included in both lists
  • Senegal (SEN) – included in both lists
  • United Arab Emirates (ARE) – included in the FATF list
  • Syria (SYR) – included in both lists
  • Trinidad and Tobago (TTO) – included in the list of the European Commission
  • Turkey (TUR) – included in the FATF list
  • Uganda (UGA) – included in both lists
  • Vanuatu (VUT) – included in the list of the European Commission
  • Zimbabwe (ZWE) – included in the list of the European Commission
  • Democratic Republic of the Congo (COD) – included in the FATF list
  • Mozambique (MOZ) – included in the FATF list
  • Tanzania (TZA) – included in the FATF list

Act No. 253/2008 Coll., on Certain Measures against the Legalization of the Proceeds from Crime and the Financing of Terrorism, which is also often referred to as the “Anti-Money Laundering Act” or the “AML/CFT Act”, describes who falls into the category of politically exposed persons.

However, the definition given in this law can be interpreted in different ways, which sometimes causes certain confusion. In this regard, the Financial Analytical Office (FAÚ) issued Methodological Instruction No. 7 of November 22, 2022, with clarification as to who exactly can be called a politically exposed person. A specific list of government functions, which determines the inclusion of a person in the category of politically exposed persons, can be found on the FAÚ website.

The information in this article applies only to the activities of companies registered and operating in the Czech Republic. At the same time, 90% of the information applies to other EU jurisdictions.

Government functions and positions that allow a person to be classified as a PEP

In accordance with the information contained in Methodological Instruction No. 7, published by the FAÚ, the list of politically exposed persons includes:

  • Persons holding the highest government positions (the President, the Prime Minister, the Head of the Office of the President, the Head of Administration and his deputies, ministers and their deputies, members of Parliament, senators, etc.);
  • Heads and employees of the central bodies of the government administration (Czech Statistical Office, Czech Mining Office, Industrial Property Office, State Office of Material Reserves, Office of National Security, etc.);
  • Chairman and deputy governing bodies of political parties and political movements;
  • Heads of local authorities (mayors and their deputies, municipal secretaries, governors and their deputies, etc.);
  • Judges of the Supreme and Constitutional Courts;
  • Members of the board of the Central Bank;
  • Senior officers of the armed forces;
  • Heads of diplomatic missions (ambassadors, consuls general, chargé d’affaires, members of the European Parliament, etc.);

How can I tell if a particular person belongs to the PEP category?

Politically exposed person: who is itAccording to the generally accepted definition, the list of politically exposed persons includes persons who can potentially be involved in corruption and bribery due to their position and influence.

In order to determine whether a person falls into this category, it is necessary to be guided by both the Anti-Money Laundering Law and Methodological Instruction No. 7 from the FAÚ, as the legislative definition of politically exposed persons is limited to general phrases and does not provide an exhaustive list of state functions, performing which a person receives PEP status.

Separately, under section 4(5)(b)(1) of the AML/CFT Act, the category of politically exposed persons includes close relatives of listed individuals, as well as those who have a close business relationship with them.

Unfortunately, there are no lists of politically exposed persons., In each case, before making a transaction or starting a business relationship, obliged entities must determine whether a potential client / counterparty is among the PEP. Procedures to determine whether a person has PEP status are an essential part of the internal policy system of any company that is required to identify its customers. Each check should be carried out in full, and information about its results should be recorded in writing.

The procedure for determining the status of politically exposed persons: what is it all about?

For determining whether a person falls into the PEP category, it is recommended to:

  • conduct an online study using the national list of government functions and positions;
  • use paid online resources that help to identify politically exposed persons based on information from open sources (for example,;
  • receive a written application from the client/counterparty.

At the same time, it is important that a person is fully informed about the significance of the status of a politically exposed person in the context of the Anti-Money Laundering Act. Also, in terms of cooperation, it is necessary to write down the client’s obligations to notify them about the change in his position during business cooperation.

FAÚ’s Methodological Instruction No. 7 recommends using more than one of these techniques to check each specific customer.

What to do if the status of a politically exposed person is confirmed?

In such situations, individuals and companies legally required to conduct background checks on their customers must apply a specific procedure. It is provided for in section 9a of the AML/CFT Act and involves enhanced identification and control of the client. It is also mandatory to determine the sources of origin of funds of politically exposed persons.

FAÚ’s Methodological Instruction No. 7 allows obliged entities to divide clients with PEP status into groups with higher and lower f ML/TF risk levels. Accordingly, different control measures proportional to the risk may be applied to each group.

For example, an affidavit (written statement) from the client is sufficient for politically exposed persons with a low level of risk to confirm the origin of funds, while when checking clients with PEP status from a high-risk group, it is recommended to use other sources of information (for example, tax returns, bank statements, etc.).

It is also essential that Section 15(2) of the AML/CFT Act states that if a politically exposed person refuses to provide information on the origin of the funds or other assets used in the transaction, the obliged entity shall not cooperate with him in any way.

Consumers of payment services now have the comfort and a wide range of options thanks to FinTech’s widespread adoption and the expansion of the payments industry. However, progress most often results in the appearance of new hazards that are not properly anticipated at the outset. The insolvency of payment institutions (PIs) and electronic money institutions (EMIs) and the resulting impact on their consumers are two such hazards that have lately been recognised.

There is proof that the consumers are not well-served by the current insolvency procedure for PIs and EMIs. Consumers were denied access to their finances for extended periods and received lower payments after discounting the distribution costs in some notable administrative situations involving PIs and EMIs.

To address these problems, the Payment Institution (PI) and Electronic Money Institution (EMI) Insolvency Regulations were established last June 2021. This was developed with a specific administration regime to update the insolvency architecture for payment and e-money institutions in the United Kingdom.

Why was the Special Administration Regime Created?

The Payment Institution (PI) and Electronic Money Institution (EMI) Insolvency Regulations 2021 were primarily built based on the Investment Bank Special Administration Regulations (IBSAR) of 2011. This is given the fact that it is much simpler for authorities and insolvency practitioners to adopt a structure they are accustomed to. This helped create a standard special administration regime for the firms under the FCA’s supervision and streamline the UK’s insolvency architecture.

The special administration regime under payment institution (PI) and electronic money institution (EMI) insolvency regulationsHowever, the primary goals of the Payment Institution (PI) and Electronic Money Institution (EMI) Insolvency Regulations 2021 varied from those of IBSAR’s. The PI and EMI Insolvency Regulations 2021 brought the Special Administration Regime with three primary goals:

  1. To enable prompt recovery of relevant funds;
  2. To guarantee prompt communication with payment system administrators, the Payment Systems Regulator, the Bank of England, HM Treasury, and the FCA; and
  3. To save the organisation as a viable business or to close it down in the greatest advantage of the stakeholders.

The insolvency professional chosen to serve as the special administrator can choose which of these goals should be prioritised, but these all must be completed. When the FCA specifies that a specific goal must be prioritised, this general rule is subject to an exemption.

The FCA cannot set goals at whim and will always be required to act in good faith and the public interest, following consultations with the Treasury and Bank of England.

Who has the Authority to Initiate the Administration Procedure?

A judicial order can initiate the special administration. And for this to happen, a member of the parties involved should submit an application. According to Regulation 8 of the Payment Institution (PI) and Electronic Money Institution (EMI) Insolvency Regulations 2021, the application can be submitted by:

  1. the institution itself;
  2. directors of the institution;
  3. creditors of the institution;
  4. person liable or alleged to be liable to contribute to the assets of the institution in the event of its being wound up;
  5. a combination of the aforementioned parties;
  6. the Financial Conduct Authority (FCA); or
  7. the Secretary of State.

The grounds for a judicial application will vary depending on the type of applicant. In general, these can be characterised in three types:

  1. the institution is, or is likely to become, unable to pay its obligations fully,
  2. a special administration order would be fair and just, or
  3. putting the institution into administration would be beneficial for the general good.

The first six parties mentioned above may submit an application using grounds a and b, i.e. the institution’s inability to pay its obligations or fairness. Meanwhile, the Secretary of State may apply the institution into a special administration under the grounds of b and c, i.e. fairness and public interest.

As previously mentioned, Payment Institution (PI) and Electronic Money Institution (EMI) Insolvency Regulations 2021 were created in accordance with the IBSAR, which also uses the term “fairness” and, in both instances, denotes a more concise version of the phrase “just and equitable”, as stated in Banking Act 2009 section 93 (8).

This issue was brought up during the HM Treasury’s consultation, where it gave assurances that the court would assess what is fair, minimising any potential negative implications for the institutions that are still operating as going concerns. PIs and EMIs in the United Kingdom should not be very worried about such trifles since courts are required by law to determine what is fair and what is not.

How are Asset Pools Defined?

According to the Payment Services Regulations of 2017 (PSRs) and the Electronic Money Regulations of 2011 (EMRs), both payment and e-money institutions, both known as “relevant funds”, are subject to strict security measures regarding the assets of their clients.

Assets that are classified, deposited into an account, accepted in an account, or acquired in compliance with the EMRs or PSRs, as well as any proceeds from an insurance policy or guarantee that are kept in an account in accordance with the EMRs or PSRs, are included in the asset pool.

For electronic money institutions, relevant funds are those that have been collected in return for electronic money that has been released. Meanwhile, for both payment institutions and electronic money institutions that provide payment services unrelated to the issuance of electronic money, relevant funds include:

  • sums acquired from a payment service consumer or for their benefit in order to execute a payment transaction; and
  • sums received from a payment service provider in order to execute a payment transaction on the consumer’s behalf.

The special administration regime under payment institution (PI) and electronic money institution (EMI) insolvency regulationsAs stipulated in the Payment Institution (PI) and Electronic Money Institution (EMI) Insolvency Regulations 2021, the administrator shall do a reconciliation as soon as possible after being appointed following the procedure used by the institution the last time it performed a reconciliation.

Reconciliation entails determining if the overall amount of relevant funds that a payment institution or electronic money institution must protect matches the total amount of relevant funds being protected. The institution’s record and statements as they appeared right after the previous reconciliation must serve as the foundation for the reconciliation.

This reconciliation procedure under the special administration regime aims to find potential excesses or shortfalls in the asset pool and reconcile them against the institution’s own financial account.

Furthermore, any shortfall in the asset pool that the administrator determines and cannot be covered by a deduction from the institution’s assets must be shared pro rata by all clients for whom the institution maintains the necessary amounts within the asset pool.

Additionally, in the case of e-money institutions that offer both payment services associated with electronic money and payment services unrelated to electronic money issuance, the administrator is not permitted to counterbalance any shortfall in one asset pool against any relevant funds or financial assets in the other. This entails that the asset pool of unrelated payment services cannot be utilized to make up a shortage in the asset pool made up of funds related to the issuing of electronic money, and vice versa.

Bar Date under the Special Administration Regime

The administrator may choose to set a “bar date” in order to provide the relevant funds to the institution’s clients as soon as is practical.

A bar date is a date by which creditors must file their claims. Without it, the administrator may have to wait a long time before they can actually pay claims. Under the bar date mechanism, the administrator can issue distributions based on relevant fund claims acquired by a certain date.

The administrator can set up two different kinds of bar dates: final bar dates, sometimes known as “hard” bar dates, and intermediate bar dates. Consumers must be provided enough period after the notification has been issued to estimate and file any monetary claims before the bar date.

Without the court’s permission, which it will grant when the administrator requests, the administrator may not set a hard bar date. The court may only grant permission to set the hard bar date in situations where:

  1. it is determined that the administrator has done everything within its power to locate and get in touch with anyone who might be eligible for the recovery of the relevant funds; and
  2. it believes that if a hard bar date is established, there will be no chance for the administrator to accept claims for the recovery of relevant funds after that time.

In summary, the placement of the hard bar date takes into account the general interests of consumers of the payment or e-money institution in question and that the Payment Institution (PI) and Electronic Money Institution (EMI) Insolvency Regulations 2021 stipulates specific guidelines to avoid potential late claimants.

Continuity of Services under the Special Administration Regime

The Payment Institution (PI) and Electronic Money Institution (EMI) Insolvency Regulations 2021 demand that services that are necessary for effective administration should be provided continuously.

When an institution becomes an administration, payment to any unpaid fees owed by the institution that was accrued before the date of administration cannot be made a requirement by the supplier.

The special administration regime under payment institution (PI) and electronic money institution (EMI) insolvency regulationsTherefore, if any charges were not fully compensated before the administration started, the main supplier will have to keep supplying the services or should not stop doing so because of the non-payment. The continuity of service for the below services is specifically mentioned under the special administration regime:

  • services relating to the protection of relevant funds (such as the provision of a bank account for relevant funds or insurance guarantees);
  • computer hardware or software used by the institution;
  • financial information and business statements;
  • infrastructure enabling digital communication services
  • data processing and data warehousing
  • secure information networks offered by an accredited network provider; or
  • access to a relevant system by a sponsoring system participant.

However, this does not mean that the providers of the aforementioned services have no chance of ceasing their services to the institution in the administration; rather, there are a few circumstances in which they are permitted to do so. The supplier is allowed to stop services under below scenarios:

  1. any costs that were accumulated after the date of administration remain unpaid for more than 28 days;
  2. the administrator permits the termination of the service; or
  3. the supplier has the permission of the court, which may be provided if the supplier can show that the continued provision of the supply would cause the supplier to suffer hardship.

It goes without saying that the administrator dealing with the institution that is covered by a special arrangement must ensure that it will have a chance to assure the return of the cash to the clients, which is why the aforementioned constraints are put in place. Such limitations on the suppliers are required for these problems, the HM Treasury stated directly in its explanatory document devoted to the Payment Institution (PI) and Electronic Money Institution (EMI) Insolvency Regulations 2021.

Transfer Arrangements under the Special Administration Regime

An administrator may organise for the transition of all or a portion of the payment or electronic money institution’s business to another institution in order to pursue objective 1 (i.e to enable prompt recovery of relevant funds) and, in some cases, concurrently pursue objective 3 (i.e. to save the organisation as a viable business or to close it down in the greatest advantage of the stakeholders). However, according to the Payment Institution (PI) and Electronic Money Institution (EMI) Insolvency Regulations 2021, the administrator is prohibited from conducting a transfer agreement unless the below requirements are satisfied:

  1. The agreement contains any clauses that the administrator deems essential to guarantee that the users or holders of the relevant funds that are to be transferred will be able to exercise their rights in relation to those funds as soon as is reasonably practical following the transfer;
  2. The institution has secured a contractual agreement from the transferee to protect both the relevant money that will be transferred and any additional relevant funds of users; and
  3. The institution has secured a contractual agreement from the transferee to inform the customers, any dealers, and/or distributors within a period of 14 days starting on the day the arrangement is entered into.

Significantly, in accordance with regulation 27, agreements with consumers, agents, and/or distributors will be seen as having been made by the institution to which they are transferred rather than the institution that was in administration, immediately following the transfer.

When an institution is fully or partially transferred and meets the criteria, the Payment Institution (PI) and Electronic Money Institution (EMI) Insolvency Regulations 2021 give the authority to disregard customer, agent, and distributor consent requirements. This includes the requirement that the institution transmits all pertinent cash, along with all rights and obligations arising from associated payment or electronic money institution contracts. As a result, for the parties involved, the transfer arrangement will have the effect of novating the aforementioned agreement.

How can COREDO help you?

If you are in need of professional advice as an existing EMI client or a new individual in the field, we have the appropriate consultants for you who can help. You may view the services that we can offer through this link: 

The Financial Conduct Authority (FCA) has recently decided to establish new consumer duty rules and guidelines in response to multiple cases of customer mistreatment from financial service organisations. These are intended to drive and allow competition based on high standards, with consumers serving as the key component of a conforming financial services

The FCA has announced that these new consumer duty regulations have already been finalised and will take effect for all new, current, and up-for-renewal products and services on July 31, 2023. Beginning on July 31, 2024, it will also apply to closed products (i.e., off the market) that the client purchased before the new regulations went into effect. In any scenario, the electronic money institutions (EMI) and payment institutions (PI) must develop a plan by the end of October 2022 for how the consumer duty will be applied through the deadline in July 2023.

The New Consumer Duty Regulations

We must examine the initial considerations for the new FCA consumer duty guidelines in order to comprehend what these are. The FCA stated that it has observed evidence of activities that hurt consumers, including businesses supplying information that is presented in a misleading or complex manner, making it challenging for customers to evaluate the product or service accurately. This was notable given that Principles 6 and 7 from the FCA Handbook’s PRIN obliged firms to give consumers’ interests and information needs significant consideration.

This prompted the FCA to establish a broad, outcome-based obligation with the consumer’s interests at its centre. The FCA consumer obligation is made up of three essential parts:
The Financial Conduct Authority Introduces New Consumer Duty Rules

  1. Consumer Principle
  • The new Principle 12 of PRIN which outlines the general level of conduct anticipated by the companies and mandates that they operate to generate favourable results for retail clients.
  1. Cross-Cutting Rules
  • Set of guidelines that require businesses to:
    • act in good faith towards retail customers;
    • ensure to set in place precautionary measures on any foreseeable harms to consumers; and
    • allow and assist retail clients in pursuing their financial goals
  1. Four Outcomes
  • A set of guidelines and standards defining more specific requirements for business behaviour in below four areas that correspond to the core components of the business-consumer connection:
    • the governance of products and services;
    • price and value;
    • consumer understanding; and
    • consumer support.

How the Principles 6 and 7 connect with the new Customer Duty Rules

As previously mentioned, Principles 6 and 7 already discussed client interests and information demands. The logical question that follows is how these concepts connect with the new FCA consumer obligation regulations.

The current Principles 6 and 7 will not apply to any new emerging customers. Instead, they work better together than separately because the new customer duty rules are outcome-based, although they have a similar concept to Principles 6 and 7. The FCA’s expectations for business behaviour are reflected in the new Principle 12, which places the client’s interests at the centre of all endeavours.

Scope of the new customer duty regulations

What Defines as a Retail Customer?

Retail customers are defined as individuals, micro-entrepreneurs, nonprofits organisations with a revenue of not more than £1 million, and a single individual operating in a position as a trustee if working for reasons unrelated to their industry, organisation, or vocation when discussing the payments and electronic money market. In other terms, retail consumers are individuals who, in the context of conventional payment/electronic money goods, might be seen as the weaker side, and to whom further legal representation must be provided.

What subjects to the new FCA consumer duty rules?

Authorised businesses engaging in ancillary operations are subject to the new FCA consumer obligation. This implies that if services are given in conjunction with regulated activities, even those services that do not necessarily fall under the FCA’s purview will be subject to the requirement. The most frequent illustration of an ancillary business in the electronic money and payments industry is currency exchange.

Unless the cryptocurrency company is also a licensed firm (e.g., an EMI and PI), the new FCA consumer duty regulations do not apply to cryptocurrency exchange and custody activities. Depending on whether the company involved has a direct connection between the crypto exchange and payment/electronic money services, that crypto-asset operations may be seen as supplementary. This might occur if the company sells payment cards connected to payment accounts that can only be topped off through cryptocurrency transfer and are regulated by the FCA as an EMI and crypto-asset exchange operator.

At what stage of the contact does the application of the consumer obligation regulations begin?

The new FCA consumer duty rule will begin to apply as soon as the company initiates communication with the potential customer (regardless of whether the potential customer becomes a customer) or the actual consumer. This can be summed up as below:

  • when authorising or declaring a financial promotion
  • when responding to a query from a potential client
  • when accepting an application from a potential client for a good or service
  • when addressing the customer.

How do the new consumer duty rules apply to distributors?

The Financial Conduct Authority Introduces New Consumer Duty RulesAll electronic money institutions (EMI) and payment institutions (PI) that significantly impact or control the outcomes for retail customers are subject to the new FCA consumer duty throughout the distribution process.

It means that the company will be compelled by the consumer duty and accountable for guaranteeing its conformance whether or not it is directly communicating with the client.

In actuality, this implies that the primary electronic money institutions (EMI) and payment institutions (PI) will be held accountable for the deeds of their agents and distributors because they had a role in how the final product was designed. This means that all of the PSD Agents, EMD Agents, and E-money Distributors must follow the consumer duty regulations outlined.

Similarly, any contracted work done for the company will be governed by the FCA consumer duty, and the company will need to think about how any of its service providers (such as customer support) may affect its adherence.

What happens upon customer duty breach?

After reviewing the consumer duty, it makes sense to wonder whether the customer will always be right and the company will be responsible for any harm. It has a solution, but it’s not as obvious as it could be. Overall, the business must watch out for its clients’ best interests and work hard to deliver positive results. It does not, however, imply that customers are essentially free from duty or responsibility for their choices. Of course, the payment/electronic money institutions are in charge of reasonably foreseeable harm, but clients can still make terrible choices.

How should electronic money institutions (EMI) and payment institutions (PI) comply with the new customer duty regulations?

It is crucial for payment and electronic money institutions to get ready for the new consumer obligation to go into effect. The following actions should be taken as a start:

  1. Design the strategy and technique for evaluating the current goods to determine whether they adhere to the new FCA consumer duty criteria.
  2. Examine the customer-facing verticals in relation to their compliance with the goals of the consumer duty.
  3. Establish the technique for evaluating new goods and services in relation to their adherence to the new consumer duty and evaluate as part of the plan-making process.
  4. To prove the results consumers are experiencing, undertake regular reviews and assessments of the goods versus their conformity to the FCA consumer obligation.

What are the best practices in adhering under the new fca customer duty regulations?

The many preliminary applicability scenarios show that the company must consider customer responsibility across the whole consumer journey. Therefore, even when a product or service is primarily designed, the new FCA consumer duty regulations must be considered. Establishing the client base and marketing objectives, it can be useful in this situation to organise the consumers and consider their preferences collectively. Pay close attention to whether the objectives outlined in our FCA consumer duty summary are realised.

Nonetheless, the new FCA consumer duty guidelines will mandate that the company consider the demands and traits of that client when responding to inquiries from a specific potential customer. An individualised approach should be used in genuine interactions with the company’s clients.

How can COREDO help you?

If you require professional advice as an existing EMI client or a new individual in the field, we have the appropriate consultants for you who can help. You may view the services that we can offer through this link: 

The abbreviation AML/CFT literally means “Anti-Money Laundering/Combating the Financing of Terrorism”. This term is used in the context of systematic fighting against the legalization of crime proceeds (the so-called “dirty money”), prevention of terrorism financing and the distribution of weapons of mass destruction.

What does the abbreviation AML/CFT stand for?Another abbreviation directly related to combating money laundering is KYC (“Know Your Customer“). It should be understood as the obligation to identify the counterparty before performing any financial transaction. This is one of the most important principles aimed at implementing AML/CFT measures.

The information in this article applies only to the activities of companies registered and operating in the Czech Republic. At the same time, 90% of the information applies to other EU jurisdictions.

All persons obliged to comply with the mentioned principles are listed in Act No. 253/2008 Coll., on Certain Measures against the Legalization of the Proceeds from Crime and the Financing of Terrorism.

This list includes loan and financial institutions, gambling operators, companies providing services related to virtual assets, companies providing services in the field of real estate and financial accounting, a person authorised to trade in used goods, or to broker such trading, as well as other companies working with the money of legal entities and individuals.

Obligations of companies under AML/CFT

When providing professional services for AML/CFT purposes, the organizations mentioned above are obliged to:

Proper compliance with these obligations is monitored by the Financial Analytical Office (FAÚ), as well as the Czech National Bank (ČNB) – the latter monitors the activities of financial and credit institutions. Failure to comply with AML/CFT obligations entails substantial penalties.

Banks or trading companies may also request confirmation of the company’s compliance with all AML/CFT measures. In case of the absence of the necessary documentation or non-fulfillment of obligations, financial institutions have the right to refuse to cooperate with such an organization.

If you are unsure whether your company is included in the list of organizations required by law to comply with the principles of AML/CFT, don’t hesitate to contact COREDO specialists for advice.

Reliable financial instruments are essential for the smooth development of international business. International payment system MultiPass is an excellent solution for businessmen. What is it and what are its advantages — read further.

What is MultiPass?

Payment System MultiPassMultiPass is a provider of complex FinTech solutions for international businesses. This payment system, headquartered in the UK, allows customers around the world to open accounts abroad and make secure money transfers online.

The creators themselves call the MultiPass system a progressive and flexible alternative to traditional banking.

MultiPass is the part of the international holding DYNINNO Group, which was founded in 2004 and specializes in optimizing business processes. Previously, this payment system was called DynaPay.

MultiPass uses a modular platform and proprietary IT solutions to provide clients with international business accounts, and enables them to go global.

The company employs a team of highly qualified experts who promptly implement the know-how emerging in the FinTech industry and contribute to the development of clients’ business.

Who is the MultiPass system suitable for?

The MultiPass payment system offers numerous products for businesses involved in international and cross-border activities. This financial instrument will be useful for:

  • companies involved in import and export;
  • organizations providing forwarding services;
  • international companies with branches in different countries;
  • IT businesses, digital marketing companies and more.

Advantages of cooperation with MultiPass

The MultiPass payment system perfectly proved itself, thousands of companies around the world use its services. Among its most significant advantages are:

  • the fastest and easiest way to open an account for all clients (you can submit documents remotely in just 10 minutes);
  • the ability to perform several business transactions from one account and fully manage personal account through online banking;
  • the ability to make payments to/from 180 countries of the world;
  • support for more than 30 world currencies in one account (EUR, USD, GBP, CHF, JPY, CZK, PLN, HUF and others);
  • the fastest payments (98% of payments are made in less than 24 hours);
  • 29 payment schemes to meet any customer needs;
  • the ability to receive and send international payments via SEPA, SWIFT, Target2, ACH and other global and local payment systems;
  • free currency conversion and favorable conversion rates;
  • the possibility of issuing both virtual and plastic payment cards;
  • the ability to open a current business account in over 20 countries to make payments as a local resident, which helps businesses eliminate additional fees.

How to open an account in the MultiPass system?

The procedure for opening an account in the MultiPass system is really as simple as possible. It does not require a personal presence, everything can be done online. The first step is to fill out an online application form, in which you need to provide your contact information.

Payment System MultiPassNext, the applicant will have to provide documents confirming his identity and address (scan/photo of the original passport/identity card, scan/photo of the document confirming the address, which is not more than 3 months old (for example, a utility bill or bank statement)), and also take a selfie with the passport/identity document. Within 3 months from the date of application, video verification of identity may be requested.

At the next stage, the applicant must provide information about his company, type of business and the intended use of the account in the MultiPass system.

And, finally, to complete the registration, the client will have to send the legal documents of the company (certificate of the registration, extract from the register containing the information about the directors and shareholders of the company, articles of association, etc.). There is no single list of documents that will be requested. It all depends on the type of business, the characteristics of the organizational-legal form of the company and some other factors.

MultiPass guarantees the most reliable protection of the client’s finances: two-factor authentication, data encryption, risk and fraud monitoring are used for this. Each client is assigned an individual experienced manager, and the online support service works 24/7.

With MultiPass, it is really easy to open an account abroad and conduct international business without unnecessary complications.

Exposing the truth behind fast EMI or PI License Transaction

Typically, time constraints drive someone to purchase a micro-payment institution, an authorised financial institution, or an e-money institution. Generally, it is thought that purchasing an authorised institution enables activities to launch more quickly than requesting authorisation from scratch.

Potential purchasers frequently believe that buying an existing authorised EMI or PI will speed up the process of entering the market compared to applying for a fresh license. Such presumptions are demonstrably untrue, as any personally liable purchaser should first undertake thorough research on the acquisition target, gather all relevant paperwork, file a request to the regulatory agencies for the transition of ownership, and then interact and respond to any inquiries may arise regarding the buyer’s intended financial model.

Many experts stated that the transfer of ownership process, from undergoing proper research to the end of receiving approval, takes about the same amount of time same with applying for a new license, both usually taking around 6 to 8 months. In addition to this, one should consider how long it will take you to identify a business that can grant the kinds of licenses required.

Another significant fallacy is the idea that buying an authorised, already-existing EMI or PI will result in a faster launch of the purchaser’s goods and services. If the purchaser launches his goods and services prior to the regulator’s approval of the transition of a control application, it would be dangerous for the purchaser and suspicious to the regulator.

One major factor in this is the existing legislation governing the country. For example, in the UK, A business with an EMI or PI license is required by the Electronic Money Regulations 2011 (EMRs 2011) and the Payment Services Regulations 2017 (PSRs) to notify the FCA of any shifts in circumstances. Additionally, we should remember that EMIs and PIs are now subject to PRIN as of 2019. The FCA must be properly informed of any significant issue related to an EMI or PI that the FCA would probably foresee or expect to be made aware of, according to Principle 11 “Relations with regulators,” which requires EMIs and PIs to report to the FCA. The SUP 15 form must typically be submitted to receive this kind of communication.

Payment (PI) and electronic money institution (EMI): here’s what you should knowThe regulatory compliance guidelines and practices of the acquisition target must be updated before the launch of any product or service to guarantee that they thoroughly address all the characteristics of the purchaser’s goods and services. In some instances, it would be difficult and most likely improbable since the EMI or PI architecture is insufficient for such items, or the customer contract has to be updated to reflect this.

But according to legislation, such a modification necessitates giving the customer 60 days’ notification. In other cases, the EMI or PI lacks the necessary permits, making launching such services impossible. For instance, the acquisition target cannot provide such a provision if it does not have authorisation for purchasing/issuing forms of payment.

This same concept also applies to the function and systems of the EMI or PI, which the authority officially approved. The purchaser who registered into the accord with the seller cannot force the seller to push out goods or services that were not included in the initial approval from the authority.

For instance, if the EMI initially received an authorisation on the premise that it will only offer digital financial services, it cannot introduce new payment cards, even if the license that was granted states that it can acquire or issue payment instruments. Before beginning card issuance operations, the firm would need to notify the authority of its plan to do so and get clearance to be entitled to this under the license terms.

What to consider before EMI/PI acquisition?

I. Regulations and Compliance Process

Prospective buyers seeking an EMI or PI license must recognise the importance of the below fundamental aspects of the authority’s strategy for the transition of ownership:
Payment (PI) and electronic money institution (EMI): here’s what you should know

  • Until the transition of ownership is permitted, the purchaser is not allowed to take over ownership of the EMI/PI unless the executive management that represents the purchaser has received regulatory approval as being associated with the target. Typically, when the transition of control ownership application is registered, the purchaser often asks for the permission of the new executive management at the same time.
  • A redesigned strategic plan, operating policies, and financial structure must always be presented to the regulatory authorities, along with the transition of ownership submission. Resubmitting the pre-existing EMI/PI’s corporate strategy, financial structure, and operational strategy as they were when it was first authorised would not be enough.
  • A fresh or revised risk management structure needs to be created since the transfer of control typically results in changes to the products and services offered. It is improbable that the authorities will be satisfied with a re-submission of the current EMI/PI’s risk management rules and processes under which the EMI/PI was initially authorised.
  • Avoid falling under the misconception that because the EMI/PI has already been approved, the ownership transition will be simple because it most likely will not be. In general, authorities view the transition of ownership as a separate permission.
  • Anticipate increased regulatory inspection of the durability and profitability of the company model and financial projections.

II. Proper Research and Due Diligence

In addition to the aforementioned items, a purchaser should keep in mind that establishing a sales contract and concluding it without conducting adequate due diligence could harm their brand and investments. Prospective purchasers should look into performing extensive due diligence on the acquisition target, paying close attention to the following points:

  • In most countries, especially in Europe, authorities require all licensed EMI or PI to begin offering operations within a year after receiving their permission. The government can revoke clearance if your acquisition target has not started offering services within 12 months. Hence, if you are purchasing a business that is more than a year old and they have not documented any consumer engagement throughout that time, you are at risk. One way to solve the issue is to mention it to the authority when submitting the transition of ownership application and ask for confirmation that you can complete a such activity and that the permission won’t be revoked.
  • Thoroughly verify all market authorisation supplied by the company and examine the operating documents to confirm the authenticity of the data provided and confirm client cash balances as well as balances on protecting bank accounts and the firm’s own funds.
  • Verify the accuracy of the safeguarding records, examine numerous examples of the daily safeguarding reconciliations, and check with the bank the outstanding balances on the safeguarding checking accounts. Any compliance issue can result in significant risk in the future.
  • Inspect all correspondence between the business and the authorities and other concerned parties, including the tax agency, the banking and finance ombudsman, the monetary criminal investigative agencies, etc. There are frequently unresolved open-ended inquiries or concerns that could be detrimental to the business and the incoming stakeholders.
  • Look for that are off-balance sheet assets, such as any guarantees given, any client finances that are not recorded in the business’s accounts, any debt securities created and not reported, etc.
  • Ask the firm’s management and stockholders for guarantees that no brokerage or distributorship agreements have been made and haven’t been declared to the authorities and customers, as these could involve obligations and reputational risk.
  • Inspect all contracts with 3rd parties cautiously since these frequently include high minimum fees and charge for early termination that often equals the total value of the agreement for the remaining years. These third parties include software providers and property owners. Closely examine which of these contracts you will have to cancel and the resulting financial harm. If possible, try to negotiate a concession on the purchase cost equal to that amount.
  • Make sure that no other party has permission to utilise the intellectual property (IP) generated by the EMI/PI for its own digital software system and solutions if those technologies’ IP rights are included in the acquisition price. Ask the sellers for guarantees that the IP was not given to a private entity and that the operator, staff, and administration will not keep backups of the codebase, technical information, or development files.
  • Revisit the company’s anti-money laundering processes, counter-terrorism financial support, anti-bribery and fraud, and budgetary crime prevention practices and policies. You should also analyse a sample of customers from various products and services to see if these practices and policies were implemented and if there is any possible hazard in the client portfolio. One of the main dangers that the buyer of the EMI/PI is exposed to is non-compliance with AML/CTF/KYC standards. You need reassurance that any misbehaviour by the clients won’t come back to haunt you in the future, including claims, guarantees, and insurance.
  • Examine any service contracts with employees, executives, and administration because they may contain clauses that provide for further incentives and payouts in the event of termination. Verify that the senior executives do not have any pending non-financial incentives.
  • Create a thorough purchase/sale contract that outlines the procedures, restrictions, and timelines of the acquisition in detail. All of these should be subject to legal permissions. Do not include firm deadlines for governmental permits and due diligence because these processes are uncertain, heavily reliant on the seller, and frequently take much longer than planned. Simply obtaining all required due diligence papers from the sellers can take months, so avoid making commitments that are out of your disposal.
  • As conventional bookkeeping firms do not generally have an in-depth understanding of the company and nuances linked to the regulatory duties, think about hiring experienced payments or e-money compliance requirements experts to undertake the due diligence on the acquisition target.
  • Use a trustworthy third-party custody operator to close the purchase/sale contract; all transactions, including the deposit, must be conditioned on the delivery of the commitments and go through the authorised agent.

III. Business and Corporation Concerns

Many parties and stakeholders should be to be taken into consideration when the purchase is being planned. If this factor is not accounted for, the company’s operations may subsequently become immobilised. In this matter, the following are some factors that must be looked into:
Payment (PI) and electronic money institution (EMI): here’s what you should know

  • Analyse the customer portfolio, price, contract terms, and others. if the acquisition target has already begun to provide services. Upon completion of the transfer of ownership, keep in mind that you might need to stop offering some services, raise prices, and end some client relations and that most of these adjustments will need 60 days’ notice to the clients, which could result in new concerns to the banking and finance ombudsman and authorities. Remember that the current source of revenue could decline dramatically or stop altogether; if necessary, try to cut purchasing prices in line with this.
  • Be mindful to thoroughly analyse the risks associated with the contracts the EMI/PI has signed with its stakeholders, particularly those with the financial institutions, suppliers, and purchasers. In several cases, the shift of ownership entails asking a third party for approval before implementing the adjustment. These partners will frequently need to establish separate investigations into the purchaser, new supervisory board, new directors, and fresh business models, as well as brand-new services and products. The enrollment procedure with these stakeholders when you purchase a firm may have to be restarted from the beginning, even though you may have relied on these ties when making a purchase.
  • If the purchaser does not adhere to the guidelines outlined in the contracts, there is a serious risk that such stakeholders may temporarily halt the delivery of services to the EMI/PI. This could have a detrimental effect on the firm’s revenue stream and result in concerns from end customers that could eventually reach the budgetary ombudsman office and/or the authority.
  • The dangers associated with changing authorised signatures for associate agreements during a managerial transfer for a firm are particularly high when it comes to financial institutions. Changing the authorised signatories on an account can take several months. In one case, a business waited for 10 months to update the user’s account authorised signatories, during which time the consumer’s finances were frozen on the account’s safeguarding bank because there was no legal way to sign the money transfer orders. Bear in mind the Covid-19 travel restrictions as well, as some traditional banks need in-person verification.
  • Think thoroughly about the acquisition target’s workforce because you could need to replace some staff members, undertake additional training, set up new qualifying programs, etc. Additionally, keep in mind the legislative employment security and dismissal processes you must adhere to. Do not undervalue the significance of a coherent and experienced team or the corresponding expenditure necessary for that area. After all, any EMI/PI is just a collection of people and IT systems.

Opinion: buy an EMI/PI license or a new one?

The time required to obtain a new license or a transition of ownership permission is not a factor when comparing an EMI or PI license for sale to an EMI or PI license that has already been issued because both are similar in that sense. In our viewpoint, it is not worthwhile to acquire an empty-shell EMI or PI license, or an EMI or PI that has not evolved much and lacks beneficial Intellectual Property in technology, goods or services, 3rd agreements, and client portfolios because the premiums demanded on the industry are frequently unjustified by any inherent assets aside from the license on its own.

A comparative assessment between a new EMI license and the available EMI license is provided below:


FACTORS Buying a License New License
Performing due diligence, undergoing proper research, and preparing contracts 1 to Months Not Applicable
Outlining necessary submissions, creating / revising operational plans, business strategies, system architectures, and review/establishing of compliance processes At least 1 Month 1 to 2 Months
Legislative Approval Period 4 to 6 months 4 to 6 months
TOTAL TIME EFFORT 6 to 8 months 6 to 8 months


FACTORS Buying a License New License
Cost of research and due diligence At least 6,000 EUR to 12,000 EUR Not Applicable
Outlining necessary submissions, creating / revising operational plans, business strategies, system architectures, and review/establishing of compliance processes At least 18,000 EUR to 42,000 EUR Maximum of 90,000 EUR
Purchase Price on top of stakeholder assets At least 400,000 EUR to 1,300,000 EUR Not Applicable
Minimum Authorized Capital At least 350,000 EUR At least 350,000 EUR
TOTAL COST 700,000 EUR to 1,500,000 EUR 450,000 EUR

As shown in the tables above, the new EMI license option will take the same period as acquiring an existing one and can be up to 3.5 times less costly than buying an expensive EMI or PI license. Additionally, with the new authorisation, there is no need to be concerned about undisclosed duties, historical problems, accrued liabilities, customer complaints, or any other significant concerns that might prevent your setup from becoming a unicorn.

The acquisition option only stands to reason if you’re purchasing an already successful company, the acquisition target’s exclusive properties, and/or a client base to launch your own items. Therefore, before buying licenses, you should consider whether it is worthwhile. Finding an EMI license for sale may not be difficult, but the actual issue is making the deal succeed.

How can COREDO help you?

If you need professional advice as an existing EMI client or a new individual in the field, we have the appropriate consultants for you who can help. You may view the services that we can offer through this link: 

Organizations whose work is related to their client’s financial assets are obliged to protect the financial system from money laundering at the local and global levels. These obligations exist under Act No. 253/2008 Coll., on Certain Measures against the Legalization of the Proceeds of Crime and the Financing of Terrorism (also known as the “Anti-Money Laundering Act” or the “AML/CFT Act”). This law details the obligations of companies under AML/CFT (Anti-Money Laundering/Terrorist Financing).

The information in this article applies only to the activities of companies registered and operating in the Czech Republic. At the same time, 90% of the information applies to other EU jurisdictions.

What is meant by AML/CFT obligations?

Obligations to combat money laundering and terrorist financing are imposed on certain companies and are regulated by the following legislative acts:

  • Act No. 253/2008 Coll., on Certain Measures against the Legalization of the Proceeds from Crime and the Financing of Terrorism;
  • Act No. 69/2006 Coll., on the Implementation of International Sanctions;
  • by-laws and other normative acts (Decree of the Czech National Bank (ČNB) No. 67/2018 Coll., ČNB Communication of 26 May 2009, Government Decree No. 210 of 28 May 2008, and others).

For companies subject to the Anti-Money Laundering Act, compliance with these obligations must be complete and comprehensive and must be applied to every transaction.

The primary AML/CFT obligations include the following:

  • Appointment of contact and authorized persons. The term of fulfillment of obligations is up to 60 days; a fine for non-fulfillment or improper fulfillment can go up to 1,000,000 CZK;
  • Development and implementation of an internal policy and risk assessment system. The term of fulfillment of obligations is up to 60 days; a fine for non-fulfillment or improper fulfillment can go up to 1,000,000 CZK;
  • Identification and control of clients, as well as persons who can act on behalf of clients, verification of clients on sanctions lists;
  • Customer activities monitoring;
  • Preservation of data on the measures taken to reduce the risks of money laundering and terrorist financing;
  • Notification of suspicious transactions to the authorities;
  • Regular staff training on the rules of compliance with AML/CFT obligations. Such training should be conducted before the employee’s appointment to the relevant post and at least once a year. In case of non-fulfillment of obligations, a fine of up to 5 000 000 CZK will be imposed on the company.

List of entities subject to AML/CFT obligations

According to Article 2 of the AML/CFT Act, so-called obliged persons are natural and legal persons whose activities are related to:
AML/CFT obligations: details, control, fines

  • real estate transactions;
  • currency exchange;
  • accounting services and tax consulting;
  • insurance;
  • lending;
  • payment services;
  • gambling;
  • second-hand goods trading;
  • management of clients’ assets;
  • registration of legal entities for sales;
  • virtual assets.

If you are not sure whether you are an obliged person under the provisions of the AML/CFT Act, you can contact COREDO’s lawyers and check.

Monitoring compliance with AML/CFT obligations

Financial Analytical Office (FAÚ) and, in some cases, the Czech National Bank (ČNB) or the Czech Trade Inspection (ČOI) monitor proper compliance with all AML/CFT obligations. If the company fails to fulfill its obligations on time (for example, the contact person was not appointed on time), or when one of the company’s clients becomes involved in an investigation on suspicion of money laundering, the risk of being inspected by regulatory authorities increases.

If it turns out that the client was engaged in money laundering through a specific company, taking advantage of the fact that some AML/CFT obligations were not properly fulfilled, the business faces serious problems. It is important to remember that ActNo. 40/2009 Coll., the amended Penal Code, takes into account not only the intentional crime of laundering crime proceeds but also contains an article on “laundering crime proceeds by negligence”.

That means an offense can be committed without malicious intent, even out of ignorance.

Examples of sanctions for non-compliance with AML/CFT obligations

  • If the company has not taken the necessary measures to identify and control the client, it faces a fine of up to 10,000,000 CZK. A similar penalty is provided for the failure to keep the data on the measures taken for 10 years.
  • If the company concludes a deal with a client who has not been identified, it faces a fine of up to 10,000,000 CZK.
  • If the company fails to train employees on the rules of compliance with AML/CFT obligations on time, then it faces a fine of up to 5,000,000 CZK.
  • If a company identifies a suspicious customer (business) and does not report it to the supervisory authorities, it faces a fine of up to CZK 5,000,000.
  • If the company fails to develop an internal policy and risk assessment system in time and to submit these documents to the FAÚ or ČNB, a fine of up to CZK 1,000,000 can be imposed in such a case.

More severe sanctions are applied in case of repeated violations – from a significant increase in the fine to a ban on conducting activities.

Financial Conduct Authority (FCA) published an article on their website last July of 2020 revealing that the surveys they conducted suggested that several institutions, which includes the United Kingdom (UK) Electronic Money Institutions, also known as EMIs, were combining clients and the company’s funds in order to keep transactional records inaccurately. It was also found that some do not have an effective and sufficient process for managing their business risks, which, in turn, makes them fail in protecting their accounts based on the standards set by the FCA. More information about the survey can be found on FCA’s website.

Further, in 2019, one more survey was done among eleven non-bank payment platforms and it concluded that there are some financial institutions that cannot explain what payment service they offered in particular scenarios, or even point out when they were releasing electronic money. It is also unclear as to when they are serving as the payment distributor on behalf of another payment service provider. This just means that these institutions do not have accurate identifiers and records of the funds and are not practicing the required standard in protecting the right amount of the said funds.

As bad as it may sound, the surveys were not only applicable to the United Kingdom, but also to some more nations in Europe. Specifically, it is noteworthy that Lithuania is among these, even being one of the main financial technology hubs.

Now, let us check what efforts these financial companies exert with regard to the licensing of electronic money (e-money) in European countries to safeguard the rules and regulations and to properly utilize the accounts.

To be able to determine this, a statistical analysis of the data from the database of the Bank of Lithuania, containing forty-three (43) Electronic Money Institutions in the same country from 2019 – 2021, was conducted.

As a result, forty-eight per cent (48%) of the sample of Lithuanian financial companies with e-money licenses incurred a discrepancy of more than fifty per cent (50%). Meaning, there are inequalities in the safeguarded accounts these companies hold versus the e-money they possess in hand. We may call these scenarios as “shortages”, which, by definition, is having less safeguarded money in relation to e-money. In the same way, it may also be a case of “excesses”, which means that there are more safeguarded funds in relation to e-money. To note, excesses are more common than shortages.

The conclusion having that big percentage of results, loudly suggests that practicing to safeguard the accounts is necessary for Electronic Money Institutions. This holds true considering that there are new participants in the EMI industry. In accordance with the data from the same study, sixty-two per cent (62%) of financial institutions having Small Electronic Money Institutions (EMI) Licenses also has more than fifty per cent (50%) discrepancy.

To further understand this, let us elaborate on the balance sheet contents of safeguarding the accounts of clients. Next would be the statistical analyses of these data.

Explaining account safeguarding and segregation through balance sheets

An essential part, but possibly infamous variance on credit institutions (wherein high-street and money-centre commercial banks are included) versus electronic money institutions (EMIs) is that EMIs must create a process that will totally secure the funds of their customers and maintain separate accounts from their own “segregated accounts”. However, credit institutions have the freedom to mix these funds deposited by their clients together with the companies’ funds and use these accordingly through investments or to extend the credit.

With this, even though EMIs have full access to their customers’ accounts or funds, they cannot use these for their own business intention aside from just transacting through issuance and e-money redemptions.


In the same way, EMIs are sticking into this condition. Let us give an example. A customer wants to transfer funds from his current bank account to another person’s bank through e-money, using EMI. Say for example the amount wanted to be transferred is one thousand euros (EUR 1,000). The two financial institutions will, then, perform the following on the back end to be able to complete the requested transaction.

  1. If in case the EMI is the holder of the customer’s fund with the same banking institution that holds the current account, the bank will debit the account and credits it to the EMI’s account. This is called “in-house settlement”, which means that there is no money leaving the bank (as what is shown in Figure 1).

How EMIs Manage Safeguarding of Accounts

  1. Having the same concept, if a customer wants to transfer money from his e-money account, the opposite of the process will be performed. In this case, for each euro (EUR 1.00) leaving the e-money account, an outflow of EUR 1.00 will be reflected on the customer’s safeguarded EMI account (considering that the funds will not be transferred to another client of the same EMI, as shown in Figure 2).

How EMIs Manage Safeguarding of Accounts

The ins and outs of the transactions elaborated on figures 1 and 2 are leading us to an expectation that once all those transactions are made into the electronic wallets of the customers through EMIs, each transaction on the EMI will have the same amount of funds in its clients’ asset, as a balance of the electronic money in its liability. That is to say, a “parity” is expected between the mentioned components, and will lead into the EMI’s balance sheet as the following:

How EMIs Manage Safeguarding of Accounts

However, what happens in real life is quite more cluttered. The rules and regulations we have for Electronic Money Institutions are not that strict. On the abovementioned figure (Figure 3), let us take the assumption that EMI is holding the fund through one more credit firm. Nevertheless, these EMIs may also consider the central bank, or in some cases, use the funds to invest in a more liquid asset that has lower risk factors.

In Figure 4 below, forty-three (43) EMIs from Lithuania are analyzed. In the analysis, three methodologies (that is, central bank, credit institutions, and more secure, low-risk and liquid assets) in holding an account were used unvaryingly during 2019. In quarter one (Q1) of 2021, most of the accounts were transferred to credit institutions.

How EMIs Manage Safeguarding of Accounts

Adding up to that, it is highly probable that Electronic Money Institutions may keep safeguarded accounts in currencies where their denomination is different from that of the respective electronic money liabilities’. Take this scenario as an example: There is a customer wanting to invest in euro (EUR) electronic money fund, and at the same time, the same amount of funds (considering its corresponding foreign exchange rate) placed on the particular EMI are in United States dollar (USD) safeguarded account.

Furtherly, we must not overlook Article 25 of the Law on Electronic Money and Electronic Money Institutions stating that EMIs have two choices as to how they could provide proper safeguarding of their client’s accounts.

These two are:

  1. The Segregated funds method – this is what is shown in the aforementioned outline.
  2. The Insurance policy method.

On the analysis of the Bank of Lithuania in 2019, the first method is the one mostly used by EMIs, therefore, resulting in the segregated funds method being set aside in this specific review.

Having these, and some more operational factors, reoccurrence of discrepancies may persist. This can be described as: scenarios wherein the amount of assets the EMIs are keeping on their safeguarded account is different from that of the electronic money amount of liabilities they have on issuance.

On the balance shown in Figure five (5) below, a case where discrepancy may occur is visible. On this balance sheet, before and after the fee for Customer X from EMI costs fifty euros (EUR 50). Customer X is debited with e-money for an amount of EUR 50, and then holds the earnings in the account which is safeguarded. This resulted in the account having a discrepancy amounting to EUR 50.

How EMIs Manage Safeguarding of Accounts

The authorities, during the period when they know that the process of totally eradicating the discrepancies will bring forth operational burden and may not be worthy of all the effort it will take, still require the EMIs to conduct settlements as oftentimes as possible. A sample case would be when the Financial Conduct Authority (FCA) spelt out (in 2021) that if ever there are discrepancies caused by reconciliations, the EMIs are required to provide justification regarding those discrepancies, and rectify them the soonest possible through payment of any deficit, and withdrawal of any extra amount, not unless the recorded discrepancy is from timing difference of the reporting system within the accounting department. Further, it was emphasized that the rectifications must be made within the specified business day.

Additionally, FCA provided two factors with regard to conciliating the assets’ safeguarding. Those are:

  1. It must be enough to make up for the expenses the company will need for the process of safeguarding before the next round of reconciliation.
  2. It should not be exaggerated so as to prevent the negative effect of commingling.

When it comes to considering the law of the western countries, specifically in Europe, there is no specific rule mirroring the mentioned ones from FCA. Instead, what they have in regulation is Article 7(1) of Directive 2009/100/EC. This establishes the qualifications and requirements for safeguarding clients’ accounts and is comparable to that Lithuania’s – Article 25 of the Republic of Lithuania Law on Electronic Money and Electronic Money Institutions.

To explain it more, the reasoning behind the existence of reconciliation because of the proper recording of the accounts. What is more, is that the consequential effect of mixing customers’ assets together with the companies’ funds and the succeeding liquidation of the companies’ funds may probably result in the customers’ funds being on the insolvency estate as well. However, truth be told, it will also eradicate the advantages of having a safeguarded account.

Continuing using the example from Figure 5, the way to correct the recorded discrepancy is when EMI transfer EUR 50 from their account that is safeguarded to its own account within the end of the same business day. This is ideal to restore the difference between the electronic money versus the safeguarded account and by doing that, the balance sheet will reflect as what is on Figure 6 below:

How EMIs Manage Safeguarding of Accounts

With all these, how can one tell that EMIs are sticking to the real-life qualifications and requirements of safeguarding accounts? The next part of this article will tell us through empirical data.

When the Data Talks

The simplest and most accurate technique to check if there are variances in the customers’ safeguarded account versus what is kept on the electronic money in issuance is through analyzing and comparing the balance sheets of the two accounts.

In this part, the analysis came from the data of forty-three EMIs from Lithuania. Figure 7 below is a scatterplot of the funds in both segregated (horizontal / x-axis), and the total outstanding electronic money liabilities (vertical / y-axis). From this, the two funds are visibly the same and significantly co-related, but not necessarily identical.

How EMIs Manage Safeguarding of Accounts

In Figure 8, a close-up of the variances is even more visible by looking at their respective ratios for the month of March 2021. With this, imbalances are indeed normal, and significant in volume, even though it is more on the “excess” part of the graph. This is considering that the ratio’s median of segregated accounts to electronic money liabilities is 1.26 during the period of December 2019 up until March 2021.

How EMIs Manage Safeguarding of Accounts

Now, take note that whether a discrepancy is an excess or a shortage, both are unpleasant from the point of view of authorities. As such, calculating the imbalances will show more than fifty per cent (50%) discrepancy, which means that they kept safeguarded money is either greater than less than 50% from that of the e-money they currently have.

The data are remarkable: forty-seven point eight per cent (47.8%) of the EMIs have variances of greater than fifty per cent (50%) by average. This is clearly shown in Figure 9.

How EMIs Manage Safeguarding of Accounts

For further analysis, we can separate the data into two subgroups: small EMIs (that is, data with electronic money of less than EUR 5 million), and the remaining would be those greater than or equal to EUR 5 million. By doing so, it was concluded that small EMIs are the top lawbreakers having sixty-one point nine per cent (61.9%) recorded discrepancy from the benchmark of 50%. Bigger EMIs have a lower discrepancy percentage, having twenty-seven point one per cent (27.1%) as what is reflected on Figure 10.

How EMIs Manage Safeguarding of Accounts

These results are distressing. If we take into account that the analysis done hypothetically suggests that fifty per cent (50%) of the credit companies in Europe have a Liquidity Coverage Ratio (LCR) of less than one hundred per cent (<100%), and twenty-seven per cent (27%) of the Global Systemically Important Banks (G-SIBs) have Leverage Ratio (LEV) of less than three per cent (<3%), neither have passed the standard set by the Basel III authorities.

Nevertheless, Republic of Lithuania Law on Electronic Money and Electronic Money Institutions is different from the United Kingdom’s Financial Conduct Authority (FCA). The former does not have a limit when it comes to working days in terms of correcting the variances in EMIs. Therefore, small EMIs are seen to have been performing poorly in providing safeguarded accounts.

Indeed, United Kingdom-based Electronic Money Institutions are not an exception to the discussion, and it seems like there are also inefficient and ineffective processes in safeguarding their customers’ funds as a whole.

How can COREDO help you?

If you are in need of professional advice as an existing EMI client or a new individual in the field, we have the appropriate consultants for you who can. You may view the services that we can offer through this link:

As part of their anti-money laundering obligations, companies are required to appoint a so-called contact person who will ensure the constant connection with the Financial Analytical Office (FAÚ), as well as to authorise a member of the statutory body responsible for compliance with obligations and record-keeping regarding anti-ML/TF measures in writing. This is provided for in articles 18, 22 and 22a of Act No. 253/2008 Coll., on Certain Measures against the Legalization of the Proceeds of Crime and the Financing of Terrorism (also known as the “Anti-Money Laundering Act” or the “AML/CFT Act”).

The information in this article applies only to the activities of companies registered and operating in the Czech Republic. At the same time, 90% of the information applies to other EU jurisdictions.

General information about an authorised person

Appointment of an authorised person and contact person to comply with the AML/CFT ActCompanies that are legally required to comply with AML/CFT legislation must notify the Financial Analytical Office of the appointment of the relevant contact person within 60 days.

In the case of replacing a contact person and another appointment, it is necessary to notify the department within 30 days. This notice must contain the name, surname, position, and all the contact details of the new contact person.

It is worth noting that according to the AML/CFT Act, the contact person of a financial institution (e.g. a mini-fund under § 15 of the ISIF Act) cannot be a member of the statutory body (except for when it is justified by the nature and area of the obliged person`s activities).

In addition, employees responsible for the conclusion and legal regulation of transactions or employees engaged in internal audits (unless justified by the nature and area of the obliged person’s activities) cannot be appointed to this position.

We recommend that you check whether a particular employee can be assigned as a contact person with the Financial Analytical Office (FAÚ) in each case.

Contact person and their obligations

One of the responsibilities of the contact person is to ensure an actual connection with the FAÚ. According to § 18 of the AML/CFT Act, such a link means notifying the supervisory authority when each suspicious transaction is detected.

One person can act as a contact person for only one company at a time.

Authorised person and their obligations

The authorised person responsible for ensuring compliance with anti-money laundering obligations under the AML/CFT Act can only be chosen and appointed from among the members of the statutory body. If there is only one member in the statutory body (for example, the managing director), then this person must be an authorised person by law. If there are several members in the statutory body, the authorised person may be selected from among them, and his powers must be delegated in writing.

The authorised person is responsible for complying with all AML obligations, including:

  • Ensures the availability of internal regulatory documents system;
  • Ensures the availability of a risk assessment system;
  • Monitors the relevance of documentation;
  • Identifies and monitors customers;
  • Trains staff, etc.

What are the consequences of not having an authorised person and a contact person?

The company’s failure to designate a contact person to ensure the constant connection with the FAÚ or to authorise a person required to monitor compliance with the AML/CFT Act in writing may result in a fine of 1 million CZK.

Failure to comply with the abovementioned requirements may also result in additional secondary risks arising from improper compliance with AML/CFT obligations. It puts the company at risk not only of a reputational nature but also attracts unwanted attention from fraudsters, leading to increased regulatory oversight and additional fines. 

The form or the specialized KYC (Know Your Customer) questionnaire is an essential element of the transparent activities of any company, which is used as part of the fight against money laundering.

Such a customer identification and control system is a practical implementation of the measures and principles established by the AML/CFT Act and prescribed in the internal policy system.

The information in this article applies only to the activities of companies registered and operating in the Czech Republic. At the same time, 90% of the information applies to other EU jurisdictions.

Act No. 253/2008 Coll., on selected measures against the legitimization of the proceeds of crime and financing of terrorism, does not explicitly require such a KYC questionnaire. However, many companies use this practical method to record specific customer identification and control stages.

At the same time, the AML/CFT Act provides for the need to record all measures taken to identify and control the customer and the associated difficulties. For this purpose, a written report shall be prepared based on the KYC questionnaire. The retention period for this information is 10 years from the termination of the business relationship with the customer.

Contents of the KYC questionnaire: requirements

Following the regulations of the AML/CFT Act and the latest guidance from the Financial Analytical Office (FAÚ), the KYC questionnaire must contain the following:
KYC questionnaire: for what purposes and who needs it?

  • Identification details of the customer as well as persons who may act on behalf of the customer;
  • Details of the identity and activities of the client (and/or persons acting on his/her behalf). For example, whether the client is a politically exposed person, whether the client is one of the persons against whom the Czech Republic applies international sanctions according to Act No. 69/2006 Coll;
  • Information on the nature of the planned trade or business relationship that gives rise to customer identification and control measures;
  • Information on the origin of monetary or other assets used in the transaction;
  • Information on the beneficial owner of the customer, who is a legal person or a trust;
  • Documentary evidence of the origin of the funds of the client, who is a politically exposed person;
  • An assessment of the risk of money laundering possessed by the client following the procedures laid down in the internal policy framework;
  • The date of the previous and next assessment.

What is the KYC questionnaire for?

The form or special KYC questionnaire records the customer identification that all companies regulated by the AML/CFT Act must conduct.

A properly completed KYC questionnaire, as well as its regular use, allows companies to make the client identification process much easier and helps reduce the risks associated with money laundering and terrorist financing.

What are the consequences of not having a KYC form?

The risk of improper compliance with anti-money laundering requirements can be significantly increased by not having a KYC questionnaire. This, in turn, may lead to inevitable consequences, namely:

  • A reduction in the quality of the identification process and, consequently, the verification of the client;
  • Unintended provision of services to undesirable persons;
  • Increased attractiveness of the business to fraudsters and abusers;
  • Reputational risks;
  • Complications in obtaining certain financial and credit services.


World’s Climate Status

According to the August 2022 Global Climate Report of the National Centers for Environmental Information (NCEI) under the National Oceanic and Atmospheric Administration, the surface temperature during the mentioned month was recorded as the sixth (6th) highest for August for the past one hundred and forty years (143 years). The measured temperature was 0.90 degree Celsius (0.9 C), or 1.63 degrees Fahrenheit (1.62 F), higher than the average of 15.6 degrees Celsius (or 60.1 degrees Fahrenheit) from 1901 – 2000.

August of 2022 can be described as warmer than the average condition around most European countries, North America, Southern Asia, and Southeastern Asia. The climate is also the same for some parts of Northern Africa and South America, along with the Arabian Peninsula and northern Oceania.

As concluded, 2022 is becoming a year of warmth, with a 10.5 per cent chance of ranking among the top five warmest years and highly probable to be in the top ten rankings.

These are all because of climate change, and it is not reversible. It is affecting our planet with crucial risks to human beings and natural ecosystems.

Financial Technology (FinTech) Today

Based on the Financial Technology report of CBInsights for quarter two (Q2) of 2022, the investments in financial technology dropped by thirty-three per cent (33 %) quarter-over-quarter (or QoQ), amounting to approximately 20.4 billion United States dollars (USD 20.4 billion). It is the lowest recorded level since quarter 4 (Q4) of 2020.

Following the same trajectory, more than one hundred million United States dollars (USD 100 million) in fundraising rounds have been figured for the total transactions (about four per cent, 4 %) and investments (about forty-seven per cent, 47 %), smaller than what it was during the same time in 2021.

During the Quarter II of 2022, here are some of the highlights of the financial technology industry:

  • A 45-per cent drop in investments amounts to 9.7 United States billion dollars (USD 9.7 billion).
  • Only twenty (20) fintech unicorns emerged, a record-breaking since the usual number is 30 in quarter four of 2020. Some of the unicorn startups are KuCoin (which is worth 10 billion United States dollars, USD 10 B), Coda Payments (around 2.5 billion United States dollars, USD 2.5 B), and Newfront Insurance (which is worth 2.2 billion United States dollars, USD 2.2 B).
  • Mergers and Acquisition transactions also dropped by about thirty per cent (30 %), with a total of 181 trades from 257 in quarter 1 of 2022. Contradictory to this, the Wealth Technology industry jumped by around twenty four per cent on the same transactions QoQ.

More information on the Q2 – 2022 Financial Technology Report can be found on this link.

What is Climate FinTech?

Given that there are a number of industries that widely affect the world’s climate negatively, more institutions are also developing new strategies for doing their business to help the environment. One of those industries is financial technology. Here is where the climate fintech comes in.

Climate FinTech: Climate and Financial Technology, CombinedClimate fintech is where real-world climate, finance, and virtual technology intersect. According to, technological innovations, applications, and tools are the essential key for the financial correspondents and channel between all the partners and shareholders looking out for global decarbonisation, meaning a low-carbon economy.

Now, as climate change brings about the economic and political danger to the world’s economic stand, several financial services companies are going an extra mile to help ease the climate change. Some of the note-worthy directives are the following:

  1. Instead of investing in non-renewable energy sources like oil and gas, entrepreneurs shifted to renewable ones like solar energy, wind, geothermal, bioenergy, and others.
  2. Investing in emission and behavior testing equipment for the business and individuals.
  3. Funding newly built infrastructures to establish insurance.
  4. Developing projects with carbon credits that uses fewer greenhouse gasses.

Some of the financial technology intuitions that started the big move are listed below:

  • FloodFlash: This London-based company is the first ever-insurance technology company that offers parametric flood insurance to as many people as possible. They combine computer models, cloud software and virtual sensors to build a flood cover that can protect their clients. For this, consumers have two parameters needed to be determined, and those are (1) the measure of water depth and (2) the total sum insured.
  • Repurpose Global: Known as an economy innovator, repurpose Global has the tag line “World’s Leading Plastic Action Platform”. They help local creators bring ethical waste management assistance to locations that do not have enough access to medical care worldwide. For more information, you can visit their website at
  • Betterview: This company is where significant Property and Casualty (P&C) insurance companies rely on when it comes to Property Intelligence and Risk Management. Throughout the client’s policy lifecycle, Betterview will lessen the risks and provide operational innovations and efficient inspection to create a customer experience with more transparency. Regarding climate fintech, they are now offering information to reduce companies’ costs and waste. You can check their services at
  • CAPE Analytics: An Artificial Intelligence (AI) – Powered Property Intelligence insurance company, CAPE offers essential perspectives to provide improved decision-making and protection of lives, livelihoods, and environment for buildings around the United States of America (USA).
  • Ando Money: As claimed to be the leader in sustainable banking, this mobile banking institution was founded with the objective of helping the environment due to climate change. One of their strategies is instead of investing in fossil fuels as most banks do, they exclusively shift their investments into green initiatives. That is, projects encouraging the reduction of carbon.

Why is there a need?

In one of the countries in Oceania, Australia, it was recorded that general insurers pay out approximately 3.89 United States dollars to 300,000 claims as victims of bushfires, floods, and storms during the summer of 2019 – 2020. Indeed, climate change is now evident in the irregular weather conditions that increase insurance costs. Further, the Australian Climate Council published a research study concluding that eight years from now, in 2030, one out of twenty-five (1:25) houses and infrastructures will not qualify for insurance.

The new Prime Minister of Australia, Anthony Albanese, was put into the seat because he promised that there would be a significant change in the country’s climate policy when elected. Now, climate change is becoming a crucial subject in most geographies since there have been droughts, floods, and bushfires in several years.

What are the Authorities up to

Climate FinTech: Climate and Financial Technology, CombinedSingapore, The Garden City, is now collaborating with the World Bank and International Emissions Trading Association (IETA) to lead and present the Climate Warehouse. The objective is to share information and lessen the multi-counting of carbon credits by gathering and connecting the different carbon credit registries in the world.

In addition, the Cloud Computing Services, Google Cloud, and the Monetary Authority of Singapore (or MAS) have introduced a program to help and assist the financial in Point Carbon Zero Programme. Their target is to grant access to the most comprehensive and detailed data relating to climate, enabling a more effective and efficient funding usage for sustainable investments.

On the other hand, the United States of America (USA) has introduced a climate bill. This bill passed by the United States Senate is under the Inflation Reduction Act of 2022 which aims to reduce the costs of prescription drugs, health care, and energy. It is probably a crucial and remarkable highlight for the financial sector. To back this claim up, as much as 375 billion United States dollars (USD 375 billion) is allotted to fund the various action plans targeting to decrease the level of carbon emission in the USA. The major strategy they intended to use is by investing in renewable energy resources and the privilege of having tax discounts for customers so they can acquire EVs.

These show that the government, specifically, the legislative body is substantially making efforts in increasing the funding for the clean technology industry.

FinTech Solutions in Helping the Climate

Now that climate risk assessments are being measured and are included in companies’ financial statements, it is deemed necessary to have capital-efficient solutions which target the removal of those risks off the balance sheets.

Climate FinTech: Climate and Financial Technology, CombinedArbol, a technological insurance company that focuses on producing parametric protection solutions due to unforeseen weather damages, is helping the corporate sector in managing risks from temperature, rainfall, and other disastrous weather events. They are the first ever to offer this kind of products and services the sole purpose is to manage climate risks. They have what they call “Arbol’s Captive + Parametric solution” which specifically turns risks from calamities into auto insurance through their parametric architecture.

With regards to major companies, the expectation is for them to have notable benefits that will segregate climate hazards/exposures based on the parametric measures.

Furthermore, customers have recently levelled up their demands by requiring green business strategies from companies. For the financial services sectors like banks, this issue has been their medium to gain more customers wherein their main marketing strategy is to invest in projects for sustainable development. During the previous year, in 2021, there is approximately 100 billions United States dollar-worth of investments in renewable energy resources, which record-breaking measure of funding to assist the shifting of the industry into an economy with lower carbon.

Simultaneously, the government are making efforts in passing bills to help the climate by requiring more green initiatives from the financial sector, however, this may take a lot more time than expected to be passed into law. The key here is to give privileges to the institutions that will invest in green projects, instead.

The technological status of renewable energy is indeed improving, having renewable resources become more affordable than fossil fuels. This is a great opportunity to take and the public is a huge force to bulldoze this up, for a more environmental-friendly financial technology industry.

What is Metaverse and how does it work?

A virtual reality focusing on the combination of social networking website, on line gaming, augmented and virtual realities (AR and VR), and cryptocurrencies – this is what metaverse is, allowing its users to virtually interact with each other.

The whole concept of metaverse is quite complicated to explain because of its sophisticated technicalities. However, what most technological specialists and experts see eye to eye with is that metaverse makes a broad line of connection where users are able to interact competently, venture in currency investments, take up courses or classes, have work, and even explore in the 3-D environment of digital reality through avatars.

Now that it is continually growing, it is highly probable that it will generate spaces on the internet world where the interaction between users will become more multi-dimensional than what is currently present on the technological industry.

Simply speaking, metaverse will make way for the users to surpass the features they are currently benefiting with such as virtual content viewing. Instead, customers may be able to experience a space where they can engage in both virtual and real worlds.

Financial Technology in the presence of Metaverse

An investor and financial technology entrepreneur, Sarah Biller, discussed the modernization occurring right now in FinTech brought about by metaverse. Biller is the co-founder of FinTech Sandbox. It is a non-profit institution that supports entrepreneurs in FinTech environment, especially startups.

As emphasized by Sarah, traditional and modern financial institutions like Fidelity Investments, JPMorgan Chase & Co., and American Express Company are thus far trying to experience the metaverse system.
Metaverse as the greatest art in financial services

  • Fidelity Investments (earlier known as Fidelity Management & Research or FMR) – This firm provides financial planning and advice, retirement plans, asset management services or programs, and trading and brokerage services, and other financial services.Fidelity, as what they known for shortly, said that metaverse is the next big thing in the evolution of internet – more like its three-dimensional representation. More so, they pointed out that we are now at the most enormous moment when it comes to financial innovations, science, mathematics, and art – a Renaissance, we may say.

    In comparison to the great developments by Michelangelo Buonarroti and Leon Battista Alberti had excellently fulfilled, metaverse is filling up the shoes of these artists well by following the same direction just as how Michelangelo and Alberti brought to perfection the usage of linear perspective in order to depict arts with three-dimensional depth.

  • JPMorgan Chase & Co. – A multinational investment banking company and financial services holding company headquartered in New York City and incorporated in Delaware, United States of America.JPMorgan claimed that they are the first bank in the metaverse. They even provide education documents to their customers to fully understand the opportunities in the metaverse. This includes the difference of the metaverse in the perspective of it being just a hype, versus to what reality can offer.
  • American Express Company(AmEx) – This financial technology company offers a wide range of services like charge and credit cards, gift cards, rewards, travel, savings, business services, and insurances.Now that metaverse has entered the picture, American Express is now developing a system where real world payment card services can work in the metaverse. According to the United States Patent and Trademark Office, the company also filed several trademark applications to patent their services in the metaverse.

We may not be able to estimate the opportunities metaverse can offer in the future, but looking at its growth today, the most accurate comparison we can go for when it comes to its value is the developments we had in the Renaissance period.

Financial Technology re-scoped financial services

CB Insights, a market intelligence platform that specializes in analyzing data points on venture capital, startup companies, patents, business partnerships and technological news, released a report on how financial technology is re-scoping financial services.

On the report, it was broadcasted that a year ago, in 2021, was investors’ momentous year as of yet. Greater than six hundred twenty-one billion US dollars (USD 621 billion) were invested, with approximately one hundred thirty-two billion US dollars (USD 132 billion) for the financial technology companies, alone.

This only pertains that one out of every five-dollar worth of investment last year went to the fintech industry to finance innovative ideas.

Brought by an avalanche of capital from investors, less expensive and universal virtual avenues (like smartphones and laptops) and positive customer experience in the face of non-traditional financial services throughout different businesses and industries, no one can disagree that we are currently living in the fastest and most advanced technology in the financial services.

Companies who are more open to innovations have adapted the new way of product and service delivery channels by using technological advancements that could integrate infrastructure and enhance human intelligence instead of going through the traditional approach. These fintech platforms from the innovative institutions are enabling the analysis and interpretation of customer information in an efficient and smart way. Meaning, these firms have been reaching additional customers through leveraged connections and efficient system and with even more products to offer.

We are not denying the fact that there are still a lot to consider and develop here; nevertheless, the most essential byproduct of this move is how the future of financial services will be – wider connectivity, companies’ cost cutting savings, and a more transparent system.

Fast-pacing move to virtual world

Financial technology has indeed brought changes and effects on the world’s financial services and other businesses and industries.

Metaverse as the greatest art in financial servicesTaking banking industry as an example. It is continually going through great leaps in the past few years since financial technology keeps on changing the said industry in every aspect.

However, it is not only traditional forms of banking that seem to be fleeting.

For ten years approximately ten years ago, several fields and areas of financial services have benefitted from financial technology. Such services are payments, custody, rules and regulations, investments on retailing businesses, and real estate. Though some have also been affected by the crisis on global health, it is mostly that due to fintech that these services grew.

One can easily express that these financial services institutions and different countries where the strategy of having convenient and at the same time, real time financial solutions will have the greatest advantages of being on top of the innovative financial market in the next ten more years.

However, that may not be the most accurate assumption one can voice out. The correct reason why every corner of financial industry will advance may be because of the possibilities the metaverse holds once it is incorporated with financial technology.

The breathtaking technological advancements that is coming into financial services seem to be going in trajectory where the new road will be the utilization of even a lot more virtual technologies. Almost all participants in the fields and areas of financial services industry have long gone set aside analog practices, and instead, have switched to digital ones.

In fact, there are a number of countries and regions where the legal tender such as bills and coins have been reformed into more convenient and economical exchanging methods like central bank digital currencies, or CBCDs.

Metaverse as a bridge to reunite financial services industry

To explain briefly, the objective of metaverse is to operate in different ways inside its virtual ecosystem. That is, to enable its users to communicate with each other, have earnings, spend their money, and most noteworthy, merge their real world and digital assets. Its presence alone forces people to think of more secure ways of protecting identities, digital transactions, and asset possessions.

Metaverse as the greatest art in financial servicesThroughout metaverse’s objective on interoperation, Web 3.0 and the metaverse is highly probable to reunite financial services industry that is currently struggling to re-enter the core of economical word, though it may be through the enveloping internet ecosystem.

What is Web 3.0? Also known as Web3, Web 3.0 is what experts can say as the “future of the internet”. It is a new web that is based in blockchain which includes cryptocurrencies, Non-fungible tokens (NFTs), decentralized autonomous organization (DAO), decentralized finance, and other financial technology programs. Web3 mainly provides a read / writes / own version of the World Wide Web wherein users are able to invest in the web community they are associated with.

Blockchain is one of the products of financial technology that will form a groundwork for the innovative financial world. Although a lot has been said about it being the future of the financial services, we can see that it is already becoming as such. It can be compared to that of the usage of clay tablet and cutting tool like chisel to build ledgers in the Mesopotamian civilization around 4000 BCE — or 6000 years ago to track the number of loaves of breads or jars of olive oil.

Simultaneously, the editor of Institutional Investor magazine, Michael Peltz published seven years ago, in 2015, that the advantage a blockchain can give is that you can do transaction in a minute and in no time, the global network is updated of the transaction that you made. In simple terms, it is convenient and you are assured that it moves in real-time.

Far from clay tablets mentioned earlier or spreadsheets, blockchain indeed confirms in real-time that an asset owned by someone can be transferred to another, or one’s identity are secured that is essential to a smooth, limitless, but advanced metaverse operational system.

Digital money that can be programmed have important responsibility in the metaverse and even the rules, regulatory, and legal concepts and constructs that determine (or do not) the latest benchmark of consumer protection program.

Today that metaverse goes beyond its line and participates in customary financial solutions excluding virtual world such as mortgages, the incorporation of currencies that brings about trust, acknowledgement, and security is notable.

It is backbreaking to predict what finance will be like in the future. However, one thing certain – it would not be as what it is presently.

What we can truly take note of is that financial technology and other new technologies will surely propel us to an even new virtual future in some such way. The metaverse may be indeed the heart of financial services in the next coming decades, and financial technology will support the new Renaissance artists to survive.

The risks of ML/TF (money laundering/terrorist financing) mean the possibility of causing damage to a legal entity and (or) the financial system through illegal money laundering or terrorist financing activities.

ML/TF risk assessment is a mandatory component of a system of internal rules that allows a particular company to clearly define all the procedures and processes for countering ML/TF. Article 21a of Act No. 253/2008 Coll., on selected measures against the legitimisation of the proceeds of crime and financing of terrorism (hereinafter referred to as the “AML/CFT Act”) states that all companies that are subject to this law and must have a written system of internal rules in place are also required to prepare a written risk assessment.

The information in this article applies only to the activities of companies that are registered and operate in the Czech Republic. At the same time, 90% of the information is applicable to other EU jurisdictions.

Requirements for preparing an ML/TF risk assessment

Under the requirements of Article 5 of Decree 67/2018 Coll., on selected requirements for the system of internal rules, procedures and control measures against the legitimisation of proceeds of crime and financing of terrorism (hereinafter referred to as the “Decree on the AML/CFT Act”), company, when assessing risks should always take into account:ML/TF risk assessment: strategy, requirements, solutions

  • the nature of its business activities;
  • the nature of the company’s products and services and the possibility of their misuse for money laundering and terrorist financing purposes;
  • the risk connected with the use of new technologies within its business activities;
  • the risks associated with the distribution channels it uses to offer and provide its products and services;
  • measures taken and applied to manage risks.

Also, when developing a risk assessment system, it is necessary to pay special attention to the global assessments published by regulators and based on statistical data analysis in the AML/CFT area. Companies should consider the volume and types of information sources that will ensure that individual risk assessments correspond with the actual risks of the company. In particular, the Decree on the AML/CFT Act obliges institutions to always take into account:

  • the national risk assessment of the Czech Republic;
  • the European risk assessment conducted by the European Commission;
  • methodological and explanatory materials of the Czech National Bank (ČNB) and Financial Analytical Office (FAÚ);
  • information provided by law enforcement agencies and the FAÚ (records of previous inspections, etc.)
  • information obtained during the identification and verification of the company’s customers.

Who is obliged to prepare a written risk assessment?

In accordance with the AML/CFT Act, a written risk assessment must be prepared by:

  • credit institutions;
  • financial institutions of all kinds;
  • gambling operators;
  • companies authorised to act as a real estate trader or broker;
  • entities providing professional services to legal entities;
  • companies involved in the circulation of virtual assets.

Requirements for the content of the risk assessment

The Financial Analytical Office has not developed or published any risk assessment templates but has posted on its website some basic guidelines to follow when preparing this document.

In particular, the ML/TF risk assessment should include at least:

  • classification of types of clients of the company by risk factors;
  • categorising the risks of products and related services that can be misused for ML/TF.

Also, in the risk assessment, it is necessary to mention examples of signs of suspicious activity included in the system of internal rules. It is important that these signs should be indicative and not just normative. Simply put, signs of suspicious activity should be described and brought into the relevant mandatory part of the system of internal rules. However, these signs should be established from the risk assessment and directly related to the portfolio of products or services offered, on the one hand, and the threats typologies provided by products or services, on the other.

ML/TF risk assessment: strategy, requirements, solutionsThe Financial Analytical Office recommends, among other things, taking into account the risks of certain jurisdictions, both in relation to the origin (citizenship) of the client and regarding the destination of the transaction. Companies also should include the risk factor associated with distribution channels in the risk categorisation of new customers.

A comprehensive risk assessment methodology is considered to be the most effective.

Companies should pay significant attention to risk management and objectively assess measures to mitigate these risks. It is necessary to comprehensively assess how effective the measures applied concerning each identified risk factor are, as well as whether they reduce potential ML/TF risks.

If the applied measures are not enough to achieve the desired result, developing and implementing additional measures is necessary.

The risk assessment should be based on analysing all available quantitative and qualitative information. However, the FAÚ emphasises that in order to prevent ML/TF, risks of different nature should not be mixed: for example, money laundering risks are of a different nature than credit default risks.

System solutions

An ML/TF risk assessment is a mandatory component of the system of internal rules, which is a clear set of instructions. It should set out all the processes, procedures and tools a company needs to fully comply with its AML/CFT obligations under the AML/CFT Act.

In most cases, this document should be in writing.

Developing a system of internal rules and a detailed risk assessment requires highly specialised AML/CFT knowledge and requirements imposed by the supervisory authorities – the Financial Analytical Office and the Czech National Bank. Consequently, the easiest and most logical solution is to commission the preparation of this document to professionals from COREDO, who have many years of experience and understand all the necessary nuances in detail.

The lack of a risk assessment system and a properly designed system of internal rules indicates a company’s non-compliance with the requirements of the AML/CFT Act, which, in turn, can lead to significant fines (up to 130 million CZK), reputational losses and increased attention from fraudsters and terrorists.

For companies subject to Act No. 253/2008 Coll., on selected measures against the legitimisation of the proceeds of crime and financing of terrorism (also known as Anti-Money Laundering Act or AML/CFT Act), it is mandatory to develop and apply in practice a specific system of internal policies, procedures and control measures – hereinafter referred to as “system of internal rules”.

The information in this article applies only to the activities of companies registered and operating in the Czech Republic. At the same time, 90% of the information applies to other EU jurisdictions.

What is a system of internal rules, and what is a risk assessment?

A system of internal rules describes specific processes, procedures and tools related to fulfilling all company obligations to combat money laundering and financing of terrorism under the AML/CFT Act. It is, in essence, a clearly defined instruction for company employees. If properly drafted and sufficiently trained, such guidance should ensure that all of the above obligations are fully implemented.

System of internal rules: features, essence, developmentSuch detailed instructions are compiled into a single document for internal use only. The purpose of the system of internal rules is to ensure that the company’s actions are in full compliance with the AML/CFT Act and to prevent unscrupulous customers from using the company’s services or products for illegal money laundering operations.

Article 21a of the AML/CFT Act establishes that companies must identify and assess the money laundering and terrorist financing risks that may arise during their activities. A risk assessment should be implemented as part of the company’s system of internal rules.

A risk assessment should include a written analysis in which companies should consider all possible risk factors, particularly the type of customers, purpose, regularity and duration of the business relationship or transaction outside of the business relationship, type of product, value and transaction method as well as the risk profile of countries or geographic areas related to the transaction.

It is mandatory to update a system of internal rules regularly, including a risk assessment. All changes must be reported to the Financial Analytical Office (FAÚ) or the Czech National Bank (ČNB). In addition, all employees whose work is affected by these documents must undergo appropriate training at least once a year.

Developing a system of internal rules: procedures

The development of the system of internal rules must be approached with utmost responsibility. In general, the procedure for this should be as follows:
System of internal rules: features, essence, development

  • determine whether the development of a system of internal rules is mandatory for a company, depending on its type of activity;
  • conduct risk assessment;
  • develop specific procedures and tools necessary to combat money laundering and terrorist financing;
  • transfer the developed document to the Financial Analytical Office or the Czech National Bank (if required by law);
  • update a system of internal policy promptly and regularly and report these changes to the aforementioned competent authorities.

Following the AML/CFT Act, a system of internal rules must be developed by the persons and companies listed in Article 2 of the AML/CFT Act. These include credit and financial institutions, gambling operators, companies authorised to act as real estate traders or brokers, legal entity service providers, those who work with virtual assets, accounting and tax advisory service providers, used goods dealers, etc.

It is worth noting that some individuals and companies are not required to have a written system of internal rules and submit it to the relevant authorities but must develop and apply all procedures to comply with their AML/CFT obligations fully. However, as practice shows, even in this case, it is more convenient to have detailed instructions for employees.

The optimal system of internal rules: content

A properly drawn up system of internal rules must, first of all, comply with Article 21 of the AML/CFT Act and the guidelines of the Financial Analytical Office and contain:

  • a list of tools that will allow the company to confirm compliance with AML/CFT obligations in the event of an audit;
  • procedures in line with standards (lists of recognized standards can be found in publications from FATF, ČNB and FAÚ);
  • clear instructions for assigned responsibilities, written in accessible language.

It is also important for the instructions to be flexible enough to consider possible changes in the company’s structure, staff turnover, etc. At the same time, they should not unduly burden either the operating staff or the customers.

Why should a specialist be assigned to develop a system of internal rules?

The development of the system of internal rules requires rather specific knowledge: this includes detailed knowledge of anti-money laundering procedures, an understanding of the international FATF standards in the field of anti-money laundering, and knowledge of the requirements put forward by the ČNB and FAÚ supervisory authorities. Therefore, it will not be easy for an ordinary company employee to cope with such a task. It is much easier to turn to experienced specialists who are professionally involved in developing the system of internal rules for various companies and can guarantee a high result.

What can the absence of the system of internal rules lead to?

If a company, which is legally required to have a system of internal rules, does not comply with AML/CFT regulations, this can lead to:

  • the imposition of a fine of 1 million CZK;
  • reputational losses for business;
  • complaints about the company from competitors.

Moreover, such a company risks attracting the attention of the competent authorities and may be suspected of aiding money laundering and terrorist financing or become attractive to fraudsters and terrorists.

Possible penalties for non-compliance with AML/CFT obligations

  • Fine up to 10 million CZK for failure to identify and verify the customers.
  • Fine up to 10 million CZK for entering into a transaction with an unidentified customer.
  • Fine up to 5 million CZK for failure to provide employees training.
  • Fine up to 5 million CZK for failure to report customers’ suspicious activity.
  • Fine of up to 1 million CZK for failure to prepare the system of internal rules and conduct risk assessment.

Compound Labs, decentralised finance (DeFi) developer, officially introduced Compound III.

For background, Compound was initially developed so that the developers could unlock an environment of open financial applications through algorithms. It is also noteworthy that Compound is an autonomous interest rate protocol.

On the other hand, Compound III is an Ethereum Virtual Machine (EVM). Technically, it allows cryptocurrency asset supply to become a form of collateral for their clients to take a loan of the base asset. Compound III is also a smooth-running and timesaving edition of the protocol, focusing on a more secure, effective, and efficient end-user experience.

You may check their official website at for more information.

Since this lending platform, Compound III, is targeting to have a more secured and scaled protocol in supporting tokens, they recently launched new governance changes. As publicised by Compound III’s founder in a blog post, the company’s move was to release a short supply of cryptocurrency being used to collateralise the protocol in the lending platform.

Compound III aims for Security and ScalabilityNow, there is the latest iteration from Compound – it was made known as Comet. In Comet, end-users are allowed to take a loan of a United States Dollar Coin, or what is called USDC. It is an individual asset that earns interest through the use of wrapped Bitcoin, or wBTC, together with native cryptocurrency tokens like Chainlink (LINK), Uniswap (UNI) and Compound (COMP), still in the form of collateral.

Further, Compound III is employing Chainlink as its company’s data feed. In the case of Chainlink and Compound III, it is called Price Feed.

Chainlink’s Price Feed for decentralised finance (DeFi) is structured in advance. It aims to give DeFi applications financial exchange data in real-time, including trading rates for cryptocurrency tokens, coins, stock market, fiat currencies, and other financial data.

Chainlink is also responsible for simplifying Compound III’s smart contracts in governance. The objective here is to improve the company’s blockchain security and scalability. This limited edition release of Smart Contract Protocol has a set limit of one hundred million United States dollars (USD 100 million) in total worth of assets or approximately two percent (2 %) of the 3.8 billion United States dollars (USD 3.8 B) worth of Compound II assets.

According to Robert Leshner, the founder of Compound, their newest version, Compound III, enables end-users to take out a loan to hit up for additional cryptocurrency tokens with safer liquidation consequences such as penalties.

In a recent interview, R. Leshner expressed that the structure of version two of Compound has many risks, to the point wherein in just a single lousy asset, the whole protocol can, in theory, be drained. In contrast, the newly developed Compound III is risk-free from plummeting because of this single lousy asset.

Compound’s earlier program was iterated with risk pooling. This allowed the company to support nine cryptocurrency coins such as ether (ETH), dai (DAI), and tether (USDT). 

In the previous version, clients would have to deposit their assets in the crypto lending pool, where the goal was to receive profits. The clients’ deposits will be exchanged with cTokens, representing the worth of the deposits they made. Through these cTokens, the lending company can take out a loan with a particular percentage of the cryptocurrency collateral’s current value.

Compound III’s Blockchain Protocol Forking

Aside from diminishing Compound’s total amount of cryptocurrency tokens they support, they are also bulldozing forks without authority.

Forking means diverging or separating a blockchain into two different trajectories moving forward. If the mentioned platform is into protocol forking, they aim to clone the codes to build a new program design. Forking is usually modifying a blockchain’s initial coding structure. However, other forks from the same company, Compound, seemed to be structured with low efforts; thus, nothing much has improved besides the branding.

Compound III aims for Security and ScalabilityIn the latest coding, the fork is required to have the acknowledgement from communities. The intent of improving this new fork protocol is to ensure that the developed codes are not prone to exploitation.

Compound has developed to be a top-considered forked blockchain protocol in the past years. However, the uncomplicated process of having non-specialist program developers Clonie’s previous editions of protocols resulted in several headaches.

In particular, an exploitation case under Compound’s previous codes brought about an approximate loss of one hundred million United States dollars (USD 100 Million). This unfortunate situation is just one of the recorded exploitations of the decentralised finance environment, wherein codes were the cause of multimillions worth of companies’ losses.

What is more, it is becoming a common scenario in the industry.

As reported by Chain analysis in their recent study, around ninety-seven per cent (97 %) of the total cryptocurrencies embezzled during the first quarter of 2022 (that is, January to March) were affected by fraud from decentralised finance protocols. The scenario was the same in 2021, with approximately seventy-two percent (72 %) of stolen cryptocurrency assets.

Improved governance

Adding up to the secured blockchain Compound III is targeting, they also have the ambition to improve their governance system. That is through what they call “Configurator”, which is a streamlined contract. It is an alternative to the current agreements typically used in the industry that is being commanded individually.

In continuation with R. Leshner’s interview earlier, he emphasised that the basis of the codes is less complicated, and all datasets are managed in just one smart contract for every operation.

Today, end-users will have more control of their assets in the decentralised finance system through this improved governance, and Chainlink’s price feeds.

Over the past years, the fintech and insurance industries have seen drastic changes, mostly beneficial improvements, especially during the Covid-19 pandemic and the still ongoing digital transformation globally. However, small and medium-sized enterprises, also called SMEs, have generally suffered greatly. Many of them resorted to taking loans to thrive because they were unable to meet the expensive demands that lockdowns and forced closures imposed on them.

As global inflation rises, SMEs are once again struggling against a rising tide. Banking firms and financial institutions can provide a helping hand in the form of new products and services that can alleviate the difficulties of running a small business during difficult times. But what precisely do they offer?


According to Rob Straathof, Chief Executive Officer of Liberis (a leading global embedded finance platform company), a key distinction between small and medium-sized business banking and big enterprise banking is that SMEs owners frequently act on instinct rather than having a board of directors or multiple CFOs manage the majority of the financial aspects of running a business.

Impact of fintech in small and medium-sized enterprisesStraathof mentioned that SMEs typically require advice around managing assets and capital, getting their bills paid timely, and making sure they have adequate liquidity to pay personnel and suppliers versus their incoming revenue.

He pointed out that there are many options open for SME owners if they need help such as loans, but the issue is that usually, they don’t fully comprehend what the appropriate goods are or whether they will be readily available once they do.

Roger Vincent, currently a managing director in Trade Ledger, a Corporate Lending Platform in Ireland and U.K., indicated that small enterprises often times offer specialized services from their banks given that they have more commonalities with their consumers than huge corporations.

Vincent mentioned that small business owners generally demand the same kind of digital capabilities that they enjoy in their personal lives, and typically, they may even manage their corporate money alongside their personal accounts. On the other side, huge Fintech companies frequently have a greater understanding of this matter than traditional banks, and more crucially, they are agile and technologically advanced. This implies that they can develop fresh goods and services that meet the demands of small enterprises extremely quickly.


Given the distinct demands and requirements when it comes to supporting services, Banks that sell products to large-scale enterprises may not always be a good fit for small businesses. Straathof argued that because fintechs provide cutting-edge tools like cash flow forecasting – which are offered by Tide, Xero, and Nuula, among others – they are typically more suited to assist small firms.

He suggested that through third-party Open Banking providers like Plaid and TrueLayer, Fintech companies may fill the gap to connect lenders to small business owners’ existing systems, data mechanisms, and bank accounts.

Fintechs can offer estimates of cash flow requirements so SME owners can determine whether they have enough money on hand, identify any overdue invoices, and, if necessary, get assistance with collections.

Straatof noted Kolleno as another illustration of a top-notch fintech that supports credit control solutions for small firms.


In most cases, small and medium-sized business owners benchmark and compare banking services and select the fintech that best meets their requirements.

According to Straathof, a firm must ask itself a full range of questions in addition to ensuring that the standard functionality was met. These includes:

  1. Is the bank an Open Banking partner?
  2. Does it work well with their accounting systems?
  3. Does it use computerized cash flow forecasting?
  4. Do they have sufficient SME credit options and services?

Straathof mentioned that many banking enterprises available in the competition do not currently offer SME lending products. He also added that even though most established banking companies do have relevant loan products available, most of them rarely approve SMEs.

Finding the ideal banking partner is not simple. And as mentioned by Straathof, the big question marks that should be asked are the aforementioned items for Open Banking, cash flow forecasting, accounting integration, and finance services.

Although it may be challenging to provide an immediate response to these queries, these should still be asked and answered, nonetheless.

Straathof also indicated that by harnessing and leveraging the data that SMEs have, Fintech organizations like Liberis should be able to work with many different ecosystems to offer the appropriate finance, to the right SME owners, at the right time.


According to Vincent, if we are going to look at the current trends and directions that retail banking is coursing, we should expect good progress and bright tomorrow for small and medium-sized banking enterprises. He added that digital services that we use on a daily basis are gradually entering the SME space since financial service companies are making significant investments to enhance their offerings to small businesses.

On top of these, a modernized and digital bank with the functionality of a “Super App” that offers products and services such as forecasting, reporting, accounting, payment transactions, invoicing, crypto and stock monitoring, etc., along with lending options available to businesses at the right time – all in one dashboard – is what Straathof calls a “mega-trend” for the next two years.


Below outlines the latest trends in small business banking:

  • TIMELINESS – Neobanks offer instant bank account creation, and conventional banks like JP Morgan, Investec, and Marcus are following suit. For companies in need of finance, Liberis may connect to their bank accounts and platforms to grant them access to immediate financing that can be collected in a matter of minutes.
  • DIGITAL PRODUCTS CONSOLIDATION – An overview of things like transactions, liquidity, unpaid invoices, tax return submissions, and financing qualifications is provided via one dashboard that interfaces with accounting software.
  • SUPER APPS – PayPal and Revolut are developing Omni-services within the constraints of their current eco-systems. For instance, users can use Revolut to make purchases, buy pet and travel insurance, and use Open Banking to link to their other bank accounts and view credit card transactions.
  • DIGITAL CAPITAL – To sustain their erratic working capital cycle, small businesses have relied on bank overdrafts or consumer credit cards for such a long time. As a result of the technological development and digital transformation in the lending space, banks, experts, and fintech companies are now developing new seemless finance products that use real-time data processing to determine a borrower’s eligibility for other lending products, including loans, invoice financing, and asset financing.
  • OPEN FINANCE – This makes it possible to collect user information from several financial platforms in a single location. Customers can get a real-time snapshot of their cash position, capture any potential threats to their organization, or spot capital deficiencies before they become serious by having all banking activities, sales transactions, and credit data on one platform.
  • EMBEDDED FINANCE – The capability of financial institutions to integrate their offers into channels run by other third parties. This could imply that a small firm can access a variety of market options through its banking platform.

Digitization has immensely evolved through the years. It has greatly influenced our ways of living and revolutionized how we interact with one another. In our daily lives, digital technologies enabled us to seamlessly communicate and connect even from across the globe.

In the financial landscape, business was considerably changed as we know it. Digital transformation and innovations made business partnerships and transactions easier and have aided the rise of mergers and acquisitions.

Mergers and Acquisitions, often referred to as M&As, is a term generally used to describe the consolidation of businesses or assets through different kinds of financial transactions. These include mergers, acquisitions, consolidations, tender offers, procurement of assets, and management acquisitions.

THE FUTURE OF MERGERS AND ACQUISITIONS IN FINTECHThe recent trend of M&As could be traced to multiple factors, however, technological advancement is undeniably one of the leading reasons. Given the huge global advancement of digital innovations in a short span of time, the cost of system transformation from legacy tools to digitally driven mechanisms have consequently led to more business collaborations and partnerships, with massive businesses cooperating with smaller companies to improve and modernize their technologies.

This business gameplan is often considered as a more efficient and affordable scheme given the less cost compared to building and transitioning to new technologies.

Thanks to the massive growth of fintech itself and the increase in capital funding within the industry, small and medium-sized entities are now able to purchase creative firms that are upending the industry with their disruptive ideas.

According to Marc Kitten, partner at a business management consulting firm called Candesic and the current director of the Imperial College Business School’s Mergers & Acquisitions Executive Education program, the current trend of mergers and acquisitions is just a logical phenomenon in the development of the fintech industry.

These changes in the traditional financial structures were likened by Kitten to what has previously happened with biontech and with the internet. The combination of various digital technologies such as machine learning (ML), artificial intelligence (AI), cloud and SaaS migration, sophisticated sensors, and many others have been disrupting conventional financial systems. This is given the fact that investing in innovative people and products rather than trying to build them internally is way more efficient, easier, faster, safer, and cheaper for financial institutions.

Kitten also pointed out that in a highly competitive and rapidly changing industry, digitalization is typically a chance for business owners and investors to cash out. Aside from this, it also helps other industry players by providing access to the consumer base and established competitors’ systems, especially in light of rising regulatory and compliance expenses.

Another factor for why businesses would rather combine than spend money on new technologies is market volatility. Financial institutions become more resilient as a result of the growth they get, especially during times of uncertainty.

According to Vivi Friedgut, CEO of Blackbullion, a digital financial wellbeing platform, the industry should expect that it’s going to be difficult to raise money for the foreseeable future, at least for the next 12 months, given the current push and pull fluctuations in the market. Because of this, Friedgut pointed out that this is a favourable time for businesses to merge and acquire one another.

Friedgut also noted that although fintechs have been preparing for a strategic exit, current circumstances also make it a great time to sell. He indicated that after a few years that Blackbullion have spent establishing its business, they are seeing that now is the perfect time to pick up speed. He sampled that in actuality, Blackbullion could possibly have constructed the product they decided to acquire, but tactically, buying it is more effective given they needed it to move quickly.


Being acquired by a larger firm can help smaller brands debut their products in a larger market and soften the shock of a volatile market, but there are some cons as well. For one, M&As may result in a lack of independence for business founders, as pointed out by Michael Buckworth, founder of Buckworths, a UK-based law company that specializes in assisting fintechs and other digital enterprises on a variety of legal and commercial concerns. As a result, these founders may find that the controls placed on them suddenly go much beyond those set by their previous VC investors and affect their budget, strategy, and staffing decisions.

THE FUTURE OF MERGERS AND ACQUISITIONS IN FINTECHBuckworth pointed out that selling and being procured by others entails giving up ownership and being owned by the buyer and, in the case of the original owner, basically turning into an employee of the acquirer. This can be a difficult transition for business owners accustomed to having a lot of operating freedom.

According to him, freshly acquired businesses may also experience focus issues because larger organizations frequently make many acquisitions, which dilutes their attention to each team.

He also pointed out that founders may discover that they must fight to keep the interest of the buyer’s management once the initial focus on implementing the purchased business has passed. This may cause disillusionment and difficulties with corporate expansion.

However, the benefits of M&A are alluring, particularly because they free entrepreneurs from the daily stress of managing the entire organization. For instance, there are more opportunities to concentrate on the company. According to Buckworth, many business owners completely consume their time and attention by constantly raising money.

He mentioned that most often, business owners are divided into multiple departments, such as HR and legal compliance, which frequently come to an end with acquisition. Ideally, teams and processes have been put in place to deal with regulatory, legal, and HR issues. Founders are then free to concentrate on the company’s core operations and specialities.

Marc Kitten also agreed, further expounding that it is highly relative to how well the buyer integrates their smaller acquisition, adding up that many acquirers unintentionally lose value by failing to establish a common corporate culture, which makes the entrepreneurs too dissatisfied to stay. He indicated that the buyer’s strategic priorities frequently shift. Sometimes the procurement served solely to eliminate a technology that was being cannibalized. He added up that some financial institutions, such as Goldman Sachs have taken lessons from the past and now operate their own mechanisms, enabling them to see emerging technologies and forge early collaborations.


The digital transformation has led to an increase in both M&As and strategic alliances and collaborations. Small and medium-sized entities no longer have to be absorbed by larger organizations; instead, they can frequently simply join forces and make use of each other’s markets, products, and services.

According to Marktlink managing partner Jonathon Parkinson, the increase in financial options is one of the major advantages of joining forces with a bigger business. He affirmed that utilizing cross-selling opportunities is a potent strategy for realizing revenue synergies and fending off competition because it allows businesses to expand their market share of current clients and get access to new markets.

Parkinson also noted that while business consolidations and procurement can both accomplish comparable things, partnerships frequently rely on ongoing cooperation and carefully cultivated connections, which makes it difficult to offer the security that supports M&A. However, he explained that the financial risk that M&A investors face inspires a stronger commitment and a long-term drive to succeed.


THE FUTURE OF MERGERS AND ACQUISITIONS IN FINTECHIn the rapidly expanding space of the fintech sector, five years is a very long time. From one month to the next, fresh modifications seem to completely modify the area. According to some industry experts, the global financial market will likely look drastically different in five years, with fintech dominating the financial services industry and purchasing numerous companies.

Buckworth mentioned that as Fintech gets steps closer to that, the community should expect companies like Revolut and others to absorb all the latest technological advancements and grow into enormous international corporations.

Another development that should be expected is the ownership of traditional banks by fintech companies, with the majority of branches closing.

Buckworth pointed out that, unlike fintech companies, traditional banks face greater costs because of their conventional business locations, in addition to high staffing costs. He mentioned that we should look forward to fintech procuring existing banks, or at least portions of these, as a strategy for gaining consumers.

Lastly, Buckworth indicated that regulators and authorities will be crucial in fostering technological innovation and promoting healthy competition. He mentioned that Open Banking and the Revised Payment Services Directive have previously helped accelerate the adoption of fintech in the UK by enabling interoperations and outside access to data. He added that such actions will aid small and medium-sized enterprises to engage outright competitions with well-established institutions and will guarantee continuous upward trend for M&As.

The purpose of any business is to increase profits and minimise risks. In the context of business security, the concept of due diligence is fundamental. Unfortunately, it is still little understood by many entrepreneurs. In this article, we’ll try to understand what it means and what you cannot do without it.

What is due diligence: etymology and clarification of the concept

In the business environment, the idea of due diligence involves the procedure of independent verification of a particular company, creating an objective and complete view of it and obtaining comprehensive knowledge about the activities, financial condition and status of the business.

The due diligence procedure, as a rule, precedes the purchase of a company, the implementation of a merger transaction, the signing of an investment agreement, etc. Such an in-depth audit is necessary to minimise the risk of unsuccessful transactions; it is worth resorting to before any serious transaction.

The term due diligence has been used in world financial practice for almost a hundred years — it first appeared in US legislative documents in 1933. Then it was explained as “disclosure by a broker to an investor of information about a company whose shares are traded on the stock exchange.”

In its modern form, due diligence standards were developed in Switzerland in 1977. Representatives of several banks worked on them and documented a unified approach to collecting information about their customers in an agreement called “The Swiss Banks Due Diligence Agreement”. Over time, the developed principles spread to the consulting business, where they began to be used for a comprehensive analysis of the activities of companies by lawyers, auditors and financial analysts.

The concept of due diligence began to penetrate the business realities of the post-Soviet countries only in the early 2000s, and in recent years this procedure has been used more often. It is especially in demand when attracting foreign capital, the company’s entry into international markets, and during the initial public offering of shares. In the post-Soviet space, no legislative framework regulates due diligence. In most cases, this procedure is carried out by the individual requirements of the customer, guided by foreign standards.

The purpose of due diligence can be called the reduction of entrepreneurial risks, including the risk of buying shares at an inflated value, losing money or property, reputational losses, etc.

Who needs due diligence and why?

All market participants may be interested in conducting due diligence. The desire of investors to receive comprehensive information about the acquisition object, its fair value, possible risks and objective potential is quite natural.

The circle of people interested in conducting due diligence also includes the owners and shareholders of the company and its top managers who want to get an objective assessment of the success of the chosen strategy or are preparing for an important deal.

Due Diligence: details about the procedure and its featuresBanks also often resort to due diligence before concluding a significant loan agreement or deciding to restructure a company’s debts. In most cases, due diligence is used to assess a particular asset’s prospects objectively.

The results of due diligence can also be helpful in the case of:

  • preparation for the issue of securities;
  • change of top management;
  • obtaining loans or sponsorship injections;
  • detection of violations during a tax or other audit;
  • decrease in the efficiency of the enterprise, deterioration of competitive positions;
  • occurrence of internal conflicts.

Due diligence procedure: types and stages

There are no clear, generally accepted rules on how due diligence should be carried out and what activities the procedure should consist of. This may depend on the company’s scope, customer requirements, acceptable research sources and other conditions.

At the same time, most experts distinguish such types of due diligence as:

  • Tax. It involves a comprehensive audit of financial and tax reporting for the last three years, identification of obvious, hidden and potential tax risks, analysis of compliance of documentation with legal requirements, etc. Tax due diligence plays a crucial role in assessing the condition and attractiveness of a potential transaction object.
  • Marketing. It involves a detailed check of the business and/or products in terms of compliance with market conditions, an assessment of the adequacy of pricing, product and communication policies, and an analysis of the company’s business reputation. When conducting marketing due diligence, the competitive environment is also often assessed, the competitive advantages of the company/product are identified, and development prospects are analysed.
  • Ecological. This means checking the likelihood of a negative impact on the environment as a result of certain activities of the company, calculating the harm to the environment from a future project and identifying facts of non-compliance with accepted environmental standards and obligations.
  • Juridical (legal). Includes legal, due diligence of all company documentation and analysis of legal aspects of work (for example, registration of intellectual property rights, lawsuits, etc.). As part of legal, due diligence, contracts with counterparties, loan agreements, encumbrances on real estate, trademark documents and much more are checked.
  • Economic (financial). It involves determining the company’s key financial indicators, its assets and liabilities, income and expenses; business prospects are analysed, and its financial stability is calculated. The quality of work of the accounting and financial services and the compliance of documentation with the regulator’s requirements are also assessed.
  • Technical. It is used when concluding transactions with real estate objects, investing in construction, production facilities, etc. This refers to verifying technical documentation and estimates, physical inspection of facilities, engineering and technical consultations, etc.

In Western practice, complex due diligence is often used, which involves a comprehensive check of the company according to various parameters.

The due diligence procedure’s duration depends on the business’s complexity and can range from several weeks to one year.

Due diligence is usually carried out by a team of experts, which includes financial analysts, auditors, and lawyers. If necessary, other specialists, such as engineers, environmentalists, experts in safety, corporate ethics, etc., can be involved in the work. The audit can be performed by the investor’s employees (of course, with the proper qualification) and by representatives of an independent consulting company. Both options have their pluses and minuses.

The result of the due diligence procedure is an objective, comprehensive assessment of a particular company, summarised in the report. In some cases, each expert gives the customer his opinion upon verification, but a general summary report is often prepared with the essential information.

Sources of information for due diligence

Due Diligence: details about the procedure and its featuresIn the process of due diligence, experts can consider any information. The study usually includes:

  • legal corporate documents;
  • financial statements for a certain period (usually for three years);
  • all kinds of reports (results of examinations, technical reports, conclusions of various specialists, etc.);
  • tangible (real estate, assets, etc.) and intangible (patents, trademarks, etc.) assets of the company;
  • contracts;
  • any information from open sources (published reports, product research, etc.);
  • insider information (data received from company employees) and much more.

Successful work requires the ability to operate with large amounts of information and draw the correct conclusions based on them. As one of the axioms of the Harvard Business School says: “Business is the ability to make effective and efficient decisions in the face of uncertainty.” The due diligence procedure will help reduce this uncertainty, reveal information that unfair entrepreneurs could try to hide, and minimise potential transaction risks. Therefore, we can confidently say that its implementation is not a whim, not an excessive precaution, but a beneficial and even necessary practice.

Since financial technology is now expanding globally, a great number of start-up and established businesses are proving that they could flow along with the innovating industry.

It started with intellectual e-commerce products and services that turned traditional financial markets into digital systems such as cryptocurrency wallets and foreign payment solutions. From there, it was revolutionized into platforms that could be operated digitally where one can pay from just a click on their gadgets.

It was really a big leap of innovation from how it was several decades ago, and it did not only allow the payment industry to grow, but also enabled e-businesses and online shopping to step on the spotlight. Further, technological advancement also opened new doors for start-up companies, small businesses, and customers.

Our team has listed the top ten financial technology payment applications to keep an eye on this 2022 as they venture into the innovative markets.

  1. BoltWith a marketing line of “One-click checkout for everyone”, Bolt claims that their service provides fast, secure, and simple payment solutions. Their objective is to democratize the market and is now estimated to be 8.4 billion worth of U.S. dollars. With their one-click payment system, they aim to offer businesses a technological feature mirroring how Amazon was since the year 1997. Aside from this, the fintech company is also ensuring that payments are real and are accepted by incorporating the utilization of payments and fraud solutions. Since they are the very first checkout platform in the world, Bolt is sticking to their fast checkout customer experience and is connecting millions of consumers to business owners globally through single, cross-band network system.
  1. Billd – This is a payment solution that gives contractors access to funds with terms that mirror their repayment cycle. Their headquarters is located in Texas, United States of America and is known to be a financial company that focuses on construction sectors. Billd is partnering up with both regional and national vendors around United States to provide short-term financial solutions to contractors through projects. Since the service is just short-term, they allow contractors to have one hundred twenty days (120) as payment term for commercial construction materials and enables the contractors to have the flexibility for the payment. The financial technology company’s co-founders, Chris Doyle and Jesse Weissburg, acknowledged the challenges of contractors when it comes to lack of capital for their business. Through Billd, this pain the contractors are experiencing while purchasing materials can be removed and can be utilized to expand their businesses.

Top 10 Financial Technology Payment Platforms in 2022

  1. Affirm – Pay at your own pace: No hidden fees, not even late fees – this is the Affirm signature line. It was launched a decade ago, and has a headquarters in San Francisco, California. This United States – based financial technology firm is publicly traded, meaning, it is a corporation whose shareholders have a claim to part of the company’s assets and profits. Affirm is focusing on financial lending which allows their customers to pay in installments. Even though the committee is out on the assessment of the fintech company’s current worth, there are still estimates that their value is ranging from USD 1 billion to USD 10 billion. This placed Affirm in a remarkable spot, and is even leading with regard to the virtual payment market. Further, they are enabling their clients to acquire microloans at the point-of-sale (POS) with the suppliers or vendors they are in partnered with. The company’s objective on this is to offer lending services that could be alternative to credit cards because of its transparency and speedy transactions.
  1. SpotOnWhether one needs a simple and user-friendly mobile payment technology, or a fully integrated restaurant management system, this company will work with you. SpotOn offers customization of tools based on your business needs and is known to be the “partner who listens”. They launched five years ago, and is currently worth USD 3.5 billion. They are proud that they are offering the main objective and without bias digital review web sites. SpotOn is available for free on iPhone and Android gadgets, where clients are allowed to check in at any events and earn rewards called “spots”. These “spots” can then be converted to prizes in addition to their current incentives.
  1. – Payments for the digital economy: aims to grow your business with the help of their flexible payment platform and local expertise. They are now valued at US 40 billion dollars, being considered as one of the leading payment platforms in the world. is standing its ground as a vendor who provides services for international electronic commerce partners. They are also considered as a business with fair-pricing products when set side by side with its competitors. The developers of this platform also integrated electronic-based payment system, as well as analytics, and close monitoring of fraud in just a single and smooth solution. is based in London, United Kingdom and is processing payments for large companies, which includes Pizza Hut, Hennes & Mauritz AB or H&M Group, and Farfetch, and financial technology companies like Coinbase, Klarna, and Revolut.
  1. AeroPay – An expert in moving money through modern bank-to-bank transfers, AeroPay is a payment platform created to offer businesses with cheaper and faster payment settlements, and strengthened security features. It also utilizes settlement process that are patented to allow “smart bank transfers” connecting businesses and their respective clients (C2B) or other businesses (B2B).
  1. Braintree“Boost Revenue with a Global Payments Partner”: This is Braintree’s tagline with their objective to reach more buyers and drive higher conversion with the only payments platform that delivers PayPal, Venmo (in the United States), credit and debit cards, and popular digital wallets like Apple Pay and Google Pay in a single, and seamless integration. To simply put it, they are a payments platform that accepts payment settlements through an application or their website. Braintree intends to be an alternative to the conventional system of having payments and merchants go through several vendors.

This platform is frequently seen to be in comparison with PayPal, however, the difference is that their objective is to have higher e-commerce businesses in volume wherein the demanded service is customized payment system. Contrasting to what others say when compared to PayPal, the latter firm was created as a simple and user-friendly application for merchants to use in e-commerce.

  1. CloverThis all-in-one point-of-sale (POS) platform was launched a decade ago with the objective to help businesses thrive by having a smarter, faster, and easier cloud-based system. They focus on four points:
    • 3.1. Easier payments – Clover accepts any type of payments in a snap—from in-person swipe, chip, and tap, to online payments.
    • 3.2. Tighter tracking – Whether one sells small products or memberships, all purchases are more secure and trackable.
    • 3.3 Happier customers – Clover claims that they provide the best possible customer experience while building loyalty at the customers’ place of business and online.
    • 3.4. More flexibility – Entrepreneurs can manage their business and make a sale from anywhere with Cloud’ dashboard, mobile app, and virtual terminal.

    With these points, this third platform is focused on providing small entrepreneurs the opportunity to introduce themselves as official vendors by just downloading Clover’s application and then open an account through their mobile phones.

    Clover’s headquarters is in Sunnyvale, California and the founders are Kelvin Zheng, Leonard Speiser, Mark Schulze and John Beatty, wherein Beatty is the current Chief Executive Officer of the financial technology company. On the other hand, the company’s owner is Fiserv, a top firm in the same industry, and has a forecasted market value of US 188 billion dollars in 3 years if they managed to continue their current growth rate.

Top 10 Financial Technology Payment Platforms in 2022

  1. PayPalOne of the most recognized and well-established financial technology platform in the world, PayPal’s original founders are Peter Thiel, Luke Nosek and Max Levchin. It was in December of 1998, originally “Confinity”, an institution that was built to develop security software for gadgets. However, that security software business plan failed to be launched; hence, the founders resorted to virtual wallets.Two years after its establishment, in March of 2000, the company still struggled to thrive within the market. Confinity, then, had a merge with another payment platform hoping to be known – which was headed by Elon Musk. It was Musk who became the Chief Executive Officer of the new company – PayPal. Afterwards, there were conflicts on the management side of the company because of leadership issues and that resulted for Thiel to resign from the new fintech company but returned as its chairman.Elon Musk carried on as the CEO of PayPal up until October, 2002, then it was bought in stock by eBay at US 1.5 billion dollars. Currently, PayPal’s value is at 130 billion US dollars and has the four marketing strategies below:
    • 2.1. Shop for the best worldwide – PayPal is in partnership with approximately ten million online stores across more than 200 markets. Consumers can buy quality goods from international stores right from their homes. Once one spots a great deal, they can just click the PayPal button and buy with confidence.
    • 2.2. Consumers purchases are protected – With their 24/7 transaction monitoring, anti-fraud technologies and Buyer Protection, consumers can shop with peace of mind.
    • 2.3. Return shipping is on PayPal – When consumers change their mind about their purchases, they can simply ship the item back to the seller and get a refund of up to USD 20 on the return shipping cost through their Refunded Returns service.
    • 2.4. Pay with preferred card – PayPal works with major banks in Philippines and overseas, hence; consumers can pay with their preferred credit or debit card and continue earning reward points.
  1. StripeMarketed as the “Payments infrastructure for the internet”, Stripe claims that millions of companies of all sizes — from startups to Fortune 500s — use their software and APIs to accept payments, send payouts, and manage their businesses online.It is an Irish-American financial and software-as-a-service (SaaS) company that was launched by Patrick and John Collison, brothers, twelve years ago (2010). Stripe has revolutionized the electronic commerce payment environment through virtual retailers with payment system that is cheaper, smoother, and more efficient.

Patrick, one of the brothers, was only a teenager then, 16, when he received the Young Scientist of the Year in 2005. It was in when he was 21 when Stripe had its launching in Patrick’s bedroom at their home. Now, the company has two headquarters in San Francisco, California, United States and is valued at US 95 billion dollars. Even though it is still awaiting to be confirmed, Stripe is now recognized in the world to have its IPO set this 2022.

The megabank previously launched its own digital challenger bank in the United Kingdom and is now making good progress, quieting down investor concerns, and showing potential global success as the bank eyes international expansion.

Last September 2021, JPMorgan Chase & Co., the America’s biggest bank, piloted a digital lender bank in the United Kingdom under the name “Chase”.

Based in Canary Wharf in London, thousands of miles away from its parent company, Chase has now been making great results in less than a year. It was able to amass more than half a million customers, raised more than 10 billion USD in deposits, and processed approximately 20 million card and payment transactions since its launch.

The objective was not only to enter the U.K. consumer banking market but also to set up a digital banking model that could potentially be scaled globally as JPMorgan eyes expansion to other countries.

Could JPMorgan Chase’s Digital Bank Be a Global SuccessAccording to Sanoke Viswanathan, Chief Executive Officer of the International Consumer initiative of JPMorgan Chase, and member of the firm’s Operating Committee, the launch of Chase U.K. has been a long process. They have been watching multiple international banking markets, hunting for country that is ready for digital-only banking channels, and obviously, U.K. is on-top in this respect.

It is undeniable that Chase U.K. is off to a great start. However, such success has not come easy and cheap. Many banking experts, and even investors have shown scrutiny over the decision to pilot a digital consumer bank in a new market, previously made by Jamie Dimon, chairman and chief executive officer of JPMorgan Chase.

This is given the recent failures of the firm with Finn, JPMorgan’s rolled out digital bank in the U.S., which lasted for only a year, resulting to millions of losses.

On top on this, the Washington Post indicated that the United Kingdom does not need a new digital bank in its market given the presence of multiple startups fighting its way against traditional firms.

So, what’s the rationale behind the experiment to establish this digital bank? How can Chase change the U.K.’s banking market? Should we expect this to be a global success?


Breaking into international banking markets is not a walk in the park, not even for a megabank such as JPMorgan Chase. Typically, new markets already have deep-rooted firms, and stepping-in requires significant effort and material investments.

JPMorgan initiated its own digital challenger in the U.K., with Fintech being in the limelight and consumer-to-business banking being less favorable. More so, JPMorgan believed an online-only bank would be much cheaper and more flexible for further experimentation.

During the initial phase of the Chase U.K. establishment, JPMorgan observed that securing low overhead is essential in making digital bank in the U.K.

Sanoke Viswanathan specified that the structure of the U.K.’s banking market is such that one should build “economies of scale” — profit is there to amass but high-cost infrastructures will make it hard to work.

Additionally, generating scale needs huge number of investments particularly in technology. This has been one of the major reasons why the Chase U.K. initiative faced serious scrutiny from investors and industry analysts, when CEO Dimon announced that the spending needed for technology-related projects would be heavy.

Could JPMorgan Chase’s Digital Bank Be a Global SuccessIt was previously reported that during that time, JPMorgan’s stakeholders showed major concerns with the firm’s plans to increase the budget for new technological initiatives by around $15 billion.

According to Mike Mayo, managing director and head of U.S. large-cap bank research at Wells Fargo Securities, multiple investors agreed with their presumptions that JPMorgan should better provide transparency on why and where this significant amount will be spent to ensure support from the industry.

Chase U.K. had to take a rocky road in gaining community trust, as it took some time to convince market experts and relieve concerns about digital bank failures, specifically one of JPMorgan’s previous experiments.

Given the previous failure of JPMorgan with Finn, their first U.S. digital bank project, shareholders and industry analysts have been critical and skeptical.

Multiple banks have tried to challenge the digital banking market in the U.S., but most faltered, which analysts attributed to insufficient demand. As estimated by Cornerstone Advisors, JPMorgan’s Finn only had around 47,000 customers during its market presence, which only lasted for about a year.


After JPMorgan’s CEO Jamie Dimon announced the firms budget announcement, the industry had been silent and tense for several months, until Viswanathan made another announcement, revealing detailed plans regarding the technological investments for Chase U.K..

It was reported that given the launch of the firm’s digital bank under Chase U.K., JPMorgan expects to lose around 1 billion USD in the following years, and that the boards hopes that the project will breakeven come 2027 or 2028.

The Motley Fool, a private financial and investing advice company, pointed out that around 70% of the allotted cost are expected to be fixed in nature. Additionally, the digital platform would be able to cater multiple products and service millions of consumers with lower marginal cost.

Viswanathan also indicated that once JPMorgan has established the presence of Chase U.K. in the industry, the same amount of investments would not be needed for further expansion to other international market.

In spite of this, there is still some level of skepticism across the community, and this should be expected to remain for some time.


Almost a year after its launch, JPMorgan has only created a single “purpose-built customer contact center” for Chase U.K., and no other branches were added. This was purposely planned by the firm, similar to most of digital challenger banks in the United Kingdom.

Could JPMorgan Chase’s Digital Bank Be a Global SuccessAs per JPMorgan CEO Jamie Dimon, the firm does not expect its digital bank to thrive and actually compete by building multiple branches in different places.

However, Chase U.K.’s service strategy is more than just a digital banking through mobile application. It began with a simple free-of-charge checking accounts with multiple budgeting and finance management packages.

Afterwards, saving accounts were added to cater demand and cope with economic changes in the U.K.

JPMorgan recently claimed that Chase U.K. was able to raise non-interest-bearing deposits amounting to more than twice from that of other digital banks in the U.K. in less than a year after its inception. The Motley Fool pointed out that this is a great start for Chase U.K., indicating that non-interest-bearing deposits are the best type of deposits a bank can hold, given its sticky nature.

This significant amount of non-interest-bearing deposits that the Chase U.K. was able gather over the year has been a great relief for the investors, helping JPMorgan to better justify its massive budget for technology investments.

On top of this, the firm’s own digital bank was able to attract hundred-thousands of customers and around 30 percent of this were flagged to be highly engaged with Chase U.K.’s products and services, as reported by the firm.

“These are customers that are using our debit cards multiple times a day, [and] making payments in and out multiple times a week, including bill payments in the form of direct debits,” Viswanathan expounded. “They’re making regular credits into their accounts — including salary credits, and they’re putting in substantial savings.”


Looking at the current trend of the progress that Chase U.K. is making, more should be expected on the coming years.

As mentioned by Sanoke Viswanathan, there are boundless of doors and opportunities for JPMorgan and its digital banking ventures.

During JPMorgan’s recent Investor Day, it was reported that the multinational investment bank expects no less than 1.5 trillion USD in revenue that is forecasted to grow at least 6 percent for the following years. Viswanathan indicated that even though banks typically falter when establishing presence in other markets outside its home-base, the firm believes that they are changing the game with digital and online banking.

Aside from Chase U.K., JPMorgan has also made other initiatives in its digital banking ventures. The megabank has recently bought Nutmeg, an online investment management service bank, eyeing 1.5 billion USD of net new money post acquisition.

In addition to this, JPMorgan has also acquired 40 percent stake in C6 Bank, Brazil’s one of the fastest growing full-service digital banks catering more than 7 million customers.

Viswanathan pointed out that JPMorgan’s investment under C6 Bank is expected to be a good resource to break into the Brazilian market, which is deemed to be third biggest retail banking market around the globe, being one of the most aggressive industry in digitization.

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Mastercard’s new biometric programme called “wave to pay” uses gestures for identification, however, analysts raised concerns on potential security risk.

With an attempt to break-in the biometrics industry, Mastercard Inc., a multinational financial services corporation and a global pioneer in payment innovation and technology, has recently piloted its new biometric initiative called ‘wave to pay’ which allows consumers to pay or transact with just a smile or a wave of the hand.

This new biometric technology utilizes gestures and body languages to administer verification processes.

Up until now, current biometric technologies, such as face recognition technology, have long been controversial and have grappled to acquire extensive usage across the Fintech industry. Despite this, Mastercard announced that it was advancing with its new biometric program to cope with the fast-changing Fintech industry and keep pace with its market competitors.

The payment giant claimed that the ‘wave to pay’ technology would be able to accelerate payment transactions, reduce waiting time, and service with better security measures that a normal debit or credit card.

Based on the recent reports released by Mastercard, once consumers are enrolled under the ‘wave to pay’ programme, there would be no need to slow down customer queueing as retailers can simply smile or wave to the camera to successfully pay and transact, eliminating unnecessary searching though bags for their cards.

Mastercard also tried to capitalize on health concerns coming from Covid surges, pointing out that with its new biometric system, transaction would touch-free and sanitary.

However, industry experts have long been raising privacy concerns, highlighting potential security risks related to data storage and surveillance. In spite of this, Mastercard specified that there are multiple researches indicating that 74 percent of consumers worldwide shows affirmative behaviour towards biometric systems.


With the recent launch of Mastercard’s ‘wave to pay’ biometric system, various discussions about security issues for retailers have been reopened. Many industry experts became skeptical and showed scrutiny towards further expansion of biometric technologies for verification purposes even though consumers are uncomfortable with data on their physical appearances are being utilized in such way.

Mastercard’s New Biometric Technology Raises Potential Security RisksOne good example of this is the recent expression of vigorous dissent from the artists of the Red Rocks Amphitheater, in which hacking issues and improper surveillance were raised as the two main reasons why the artists do not subscribe with biometric mechanisms. This skepticism from the artists became the reason for the theater to drop its Amazon palm scanning system.

Recently, Suzie Mile from Ashfords LPP, a law firm from the United Kingdom providing legal and professional service, said in a statement that Mastercard themselves should be able to acknowledge the existence of data privacy and security concerns that biometrics brought with. She mentioned that risks of security and privacy breach could be much higher with biometric technologies that the current payment systems we have. It would be much difficult to recover from any biometric data breach given that any gesture such as smile and wave cannot be simply changed, unlike passcodes.

There were also previous skepticism coming from the government regarding these biometric mechanisms.

Last August 2021, members of the Senate from the United States of America issued reports raising questions over transactions and security practices in place for payments via biometric solutions. Furthermore, in China, privacy concerns from the authorities recently hindered the launch and adaptation of facial recognition technologies.

Despite this, Mastercard stressed out that security measures will be in place with its new ‘wave to pay’ biometric solution. The giant company pointed out that any physical gestures and languages from the consumers that will be generated would be native to the specific devices, and that personal data would be encrypted using digital templates.


In the middle of various debates and discussions related to biometrics in general, Mastercard claimed that its ‘wave to pay’ biometric system will potentially create a payment standard that would be able to cater transaction of any size.

Mastercard also announced that its new technology will be supported in a partnership with Payface (a payment system company that uses face recognition technology), Fujitsu and NEC Corporation (both Japanese multinational information and communications technology companies).

This is to ensure that they will be able to establish technology that will provide top-notch performance, with proper privacy and security measures.

Recently, Ajay Bhalla, the president of Mastercard’s Cyber & Intelligence business and is a member of the company’s global management committee, stated that the giant payment company is attempting to accommodate what the industry demands over the broad space of payment services.

He mentioned that the company would ensure to uphold its principles in managing transactions properly, with safe methods and consent from the consumer.


Biometric solutions have been utilized in the digital banking industry from quite some time now. One of the most used and adopted biometric system in fintech is through fingerprints. With single contact and a tap of a finger in smartphones, payments are easily accessed. Transactions can be operated via that device as long as the verified customer is the one using it.

Another biometric solution currently in place is face recognition. It was first introduced by Apple way back 2016, in which the technology was incorporated in its mobile devices.

More developed face recognition technologies available for digital transaction purposes is available from various technology companies such as NEC Corporation from Japan, Payface from Brazil, and PopID from California.

Cryptocurrency has survived for the longest time without being controlled by the authorities, but now there are proposed laws and regulations about it. Hence, the meaning of this for the crypto industry is currently unclear.

Back when crypto was just starting, it was considered the “wild west” of the financial industry – some kind of lawless system inhabited by suspicious individuals where each person was forced to take care of himself or herself.

Changes can be seen from how it was ten years ago. With all the complex instances where both cryptocurrency and blockchain were dragged into, the promise that a significant regulatory plan for the industry now has a greater chance of possibility.

As authorities start to introduce new laws and regulations to crypto institutions, it is not surprising that people are thinking about how these would affect the crypto environment. Will there be stricter management that will positively make a change in the industry or will it be a strength to hinder the development of crypto’s infinite improvement?

Introducing James Burnie

James Burnie is a financial services regulation and Financial Technology Partner, advising financial institutions on Europe and the United Kingdom financial regulation at a law firm, gunnercooke. They stand for large-scale cryptocurrency and blockchain products and services that are believed to be affected by all laws and regulations that will be implemented in the industry.

However, James does not agree that newly introduced rulings will cause trouble. Instead, he said that a certain level of laws and regulations is necessary.In an interview, topics on the future of the cryptocurrency environment and the regulations that come with it were discussed.

All about Burnie – Background; and how he started in cryptocurrency

James remarked that he is attracted to breaking new ground since regulation is amusing, especially when one is viewing it as something where development may root from.

The start was when he worked on the very first and fruitful establishment of cryptocurrency assets (also known as the initial coin offering) from the United Kingdom. For the reason of its success and just several lawyers in the said country were into the industry as it started, his involvement expanded.

In the course of time, instead of treating cryptocurrency as just a hobby, it became his primary job.

Talking about Gunnercooke and its areas of practice

A company whose focus is on corporate and commercial disciplines, Gunnercooke has approximately five hundred employees around Europe and has an income of GBP 50 million.

They have the United Kingdom’s widest crypto and financial technology service having more than one hundred customers, and a large market in Germany directed by Wolfgang Richter.

Lately, they just launched a practice conducted by Kathryn Dodds which introduced blockchain and creative industries for music, media, and arts.

Further, they work with transactions involving the blockchain industry, which includes designers and developers, cryptocurrency custodial solutions, blockchain applications, crypto trading, trading through distributed ledger technology (DLT), virtual asset brokers and funds, and financial technology organizations.

Current Laws and Regulations on Cryptocurrency and Blockchain Enterprise

Worldwide, the initial mark where regulations started was from these two primary regulatory regimes:
Regulating the “Wild West” Cryptocurrency

  1. The Anti-Money Laundering Regime (AML regime) – its focus is to prevent illegally obtained money which is usually through transferring from cross-border banks or businesses. The laws of this regime are identified based on the business location.
  2. The Securities Regime – this regime identifies if a crypto token must be managed based on the location of the law where the asset was traded.

Nevertheless, this is eventually turning into a more complicated arrangement. Several examples can be seen below:

  1. Mauritius is starting a wider groundwork for cryptocurrency asset institutions;
  2. The United Kingdom is considering a specialist regime for stable coins; and
  3. European Markets in Crypto Assets law is being legislated.

Hence, one can observe a fascinating exchange among regulators whose objectives are just a single thing, which is to make the right decision regarding cryptocurrency management, but in contrast, have different perspectives on what that implies in reality.

Diminishing risk during volatile season

It is noteworthy that investing is only one of the usages of cryptocurrency assets. Several activities do not include this, and hence, it is not substantial for these activities that virtual assets used for investing are inconsistent.

However, when one looks at these assets like an investment, volatility may not be the issue and it will all depend on what one is obtaining. The principal issue would be the degree of risks and returns.

All of us know that low-risk assets are expected to have a lower return, and high-risk assets tend to give a higher return.

Taking this into consideration, cryptocurrency belongs to high-risk ones. If crypto enthusiasts know this wisdom, they would handle their assets responsibly and that there is no need to be anxious. For instance, it is significant to hold your assets just right, not overly exposed.

Therefore, it was suggested by the Financial Conduct Authority FCA that virtual asset traders should be limited by the law to not exceed ten percent of their overall asset value.

In contrast, one should be more careful of the low-return / high-risk investments because in these transactions investors mistakenly take them as lower risk than they already are.

Is it inevitable that more laws and regulations are being applied to the crypto industry?

As a definition, regulation means that there is a rule maintained by authorities for a certain project or activity. It just plainly suggests that these regulators want to do the “right thing”.

Regulating the “Wild West” CryptocurrencyIn particular, European authorities are prioritizing the rights of each person, as such, they focus on ways to protect their consumers and legislation like EU General Data Protection Regulation. Another is in the United States of America wherein they concentrate on corporation rights thinking that the corporate world is the foundation of their economic system. China, on the other hand, goes with their state, as they consider it as the one who can provide the best decisions for the people of their country.

Thinking about development, people should not think about the laws and regulations as blockers to the industry’s growth. Instead, the concern is how they could turn these regulations as just an objective to how they will be obtained, specifically, the “right thing”.

What’s more mind-boggling is the question of how these could be fulfilled given that there are numerous ways and methods by different parties involved.

At the present time, we can see various authorities discuss the backbreaking demand for crypto’s technological development, and are putting an attempt to balance risk and opportunities in an industry wherein progress is still ongoing.

In the United Kingdom, they have the FCA’s CryptoSprint as a welcoming provision. They just hosted their very first CryptoSprint events in May and June 2022. The objective of the events was to seek industry views on the current market and the design of an appropriate regulatory regime. This is showing that the country’s board of regulations is engaged with the developing pace of the cryptocurrency, especially when it comes to its laws.

The Need for Crypto Regulations

Is it needed? Yes, but to some degree. Why? Because regulations take off the nasty stuff in the industry. It just needs to be on the correct side and recognizes the broadness of the environment.

It can be illustrated by taking a game company as a case. In this illustration, the company rewards the winners of the game with some cryptocurrency tokens and these tokens unlock another level of the game, which in turn grants a different account that offers token-lending services seeking a profit for the investors. Looking into this, any law or regulation concerning virtual assets is required to have sensitivity in the market, should be adaptable, and be open to any change.

Imagining Hope and Expectation

Most cryptocurrency enthusiasts yearn for a standard line of attack when it comes to laws and regulations wherein the main point is to have the sole correct answer to regulatory questions. This will make the legal cost of operation to be reduced, but it is more than just a dream than a reality.

As James commented, his expectation of the regulation runs by having various strategies, though it may seem complex, these variations may provide more positive impacts on the industry than just confusion.

Specifically, every unique enterprise paradigm is anticipated to be drawn to the regulatory regimes that are most suited for that specific business. However, this does not imply that they are competing to be seen as cheaper than other companies because an operation led by a good administration provides consolation to the consumers and co-contractors concerning the stability of the said companies. Hence, the strategy will come up as something to serve their clients a “premium”.

The Value of Cryptocurrency in the Real World

People are now torn between traditional financial methods and the virtual asset world. Just like how it was during the iPad versus computer period, most businesses that are using blockchain on their model, have several things in common with the conventional methods. This brings about the criticism on why someone would change a process that is currently working. However, “working” in this sense only denotes that users have been putting up with it since there is no available substitute, not that it is working well and efficiently.

Supporting this was Burnie’s client some years past. This person never confessed that he only utilized blockchain technology because of the fact that other people considered it unappealing. With this, he just charged one-tenth of the competitors’ rate, while making it more profitable through blockchain.

Another actual example of the advantages of blockchain is transaction reporting. This is by submitting data, which contains information relating to a transaction. These reports are used to detect and investigate suspected market abuse. With respect to the law, trading securities are required to have these kinds of reports.

Having crypto assets being utilized as securities, automation on reporting procedures can be done, cutting down the operational cost. For the upcoming half-decade, it is expected that blockchain technology will spread to all sectors of businesses, and people will not make it something to be anxious about, but instead, a noticeable tool.

Practice what you preach: The importance of accepting cryptocurrency as a payment method

Burnie agreed that it is kind of a “practice what you preach” case because it is hard to accept the concept of cryptocurrency if you do not fully take it into your system. Aside from this, it is also important to perceive where it will eventually head.

Regulating the “Wild West” CryptocurrencyFast-paced industries are going ahead with the developing cryptocurrency curve. This is because crypto is now accepted as payment in several businesses, and major organizations like Microsoft Corporation and financial technology corporation, PayPal. Specifically, they are ready to receive bitcoins (BTCs).

Numerous big economical systems are researching how they could integrate cryptocurrency as a payment method along with the conventional currency. While the inconsistency of the present market fascinates public attention, it is still heading into the mainstream and is highly probable that it will become more extensively accepted in the upcoming generation.

Generally, the concept is also more about following the pace of industrial innovations. However, this is contradictory to the traditional viewpoint that each and every lawyer is not into modernization, since gunnercooke has one of the popular cryptocurrency and financial technology services in the United Kingdom. With this, it is reasonable for the institution to accept crypto as payment.

An increase in the need for both customers and future investors in this industry to make payments via crypto is observed, therefore, it is essential from a customer and business view to have both the traditional currency and cryptocurrency as options.

Several enthusiasts of virtual financial markets expressed their disapproval of the move of Celsius, but some agreed to say that it could be for the protection of their users; ETH plunged to 17%.

Crypto Prices :

  • Bitcoin (BTC): USD 22, 209 (-16.6%)
  • Ether (ETH): USD 1, 193 (-17%)


Coin Returns DACS Sector
ETH −16.4% Smart Contract Platform
BTC −16.3% Currency
DOGE −15.7% Currency

Challenging times for Crypto Industry

Venture capitalists had options to compare with in detailing BTC’s plummeting price.

Since December 2020, it sank to its lowest price.

The top cryptocurrency in terms of market capitalization plunged to about one-third of its highest value of approximately USD 70, 000 in the past eight months, and less than one-half of how much it was during the first part of 2022.

Аналитики о приостановке вывода средств с платформы Celsius; BTC упал ниже 23 тысяч долларов СШАIn twenty – four hours, it dropped to 16 percent, an uncommon scenario of having a double-digit decrease in the crypto’s value. On the other hand, it was down by about 30 percent from May, having a value of about USD 30, 000 due to the crumbled value of another token, terraUSD (UST).

It was indeed a terrible day for bitcoin, and so did for other cryptocurrencies. Computing their aggregated market capitalization, it did not reach USD 1 trillion. This was a first since 2021, despite having inflation fears and bad news from different protocols, such as crypto lending platform Celsius’ advisory that they would be pausing withdrawals due to the “extreme market conditions”.

Ether (ETH), the second only to BTC by market capitalization, has almost the equivalent decrease in value, around negative 17%. It was during the same time span as BTC’s and its lowest since 2021.

On the other hand, CRO was higher than 20 percent at an instance even with the update that cryptocurrency trading would cut off the 5 percent of its employees, almost two hundred sixty jobs. Tron (TRX) and Wrapped Bitcoin (WBTC) were also down during the same period.

With all the plunge, market analysts voiced out their views, and some even offered instantaneous consolations:

  • The head of research for 3iQ Digital Asset, Mark Connors, told CoinDesk that this is “a storm”.
  • As per Rich Blake, a financial consultant from Uphold wrote that BTC bears are indeed in “ruckus mode”.
  • Edward Moya, a senior analyst in Oanda, emphasized that even if BTC is striving to build its foundation if the price keeps on going down until below USD 20, 000, the journey might be harder.
  • Hargreaves Lansdown and Susannah Streeter, a senior investment and market analyst respectively, expressed that due to the increase in consumer prices caused by inflation, bitcoin and ether are its “prime victims”, being disfavored as risky investments.

Cryptocurrency’s current adversity tracked the blow of major world stock market indexes, having tech stocks being the most affected. The S&P 500 tumbled down to 3.8 percent, rejoining the bear market – hence, it was at negative 20 percent from its previous value.

Nasdaq, an American stock exchange company, entered the bear market several weeks ago as it plummeted by 4.6 percent. On the other hand, Dow Jones Industrial Average was down by 2.7 percent.

Unexpectedly, the long-established asset – gold, also fell by almost three percent.

Now, investors surely looked out for the United States Federal Reserve’s 2-day meeting, which began last Tuesday and was extensively expected to lead up to a fifty-basis point interest rate increase because of the high inflation. The most updated United States Consumer Price Index report stated that there has been a rise of 8.6 percent, the highest in the last four decades.

Connor of 3iQ positively pointed out that cryptocurrency today is still in the range of its growth band, and corresponds to how it was for the past thirteen-plus years. Further, given the mandate of United States President Joe regarding cryptocurrency regulatory executive order, he emphasized that we are still within the band of volatility for the past 5 years.

However, we can still see that crypto is now in a terrible state, having an uncertain future in the industry.

BlockFi Trading, a platform where you can buy, sell, and trade various cryptocurrency assets, announced that it would reduce its workforce by twenty percent. Rain Financial also laid-off employees, just after and BlockFi’s workforce cut off.

Аналитики о приостановке вывода средств с платформы Celsius; BTC упал ниже 23 тысяч долларов СШАJust this month, Binance, the largest and most known crypto trading platform, paused their clients’ withdrawals for a short time.

Blake from Uphold wrote that virtual assets will now be put to a test if a bigger increase in price will occur. He also said that at this time, extreme market conditions and federal laws are worsening the negative state of cryptocurrency.

Market Prices:

  • S&P 500: USD 3,749 (-3.8 %)
  • Dow Jones Industrial Average (DJIA): USD 30,516 (-2.7 %)
  • National Association of Securities Dealers Automated Quotations (NASDAQ): USD 10,809 (-4.6 %)
  • Gold: USD 1,821 (-2.9 %)

Analysts’ Different Views on Celsius’ Pause on Withdrawals

Celsius, a well-known cryptocurrency lending platform, recently announced the pause of their customers’ withdrawals and trading of crypto products as a consequence of the current “extreme market conditions” in the midst of the economic downtrend.

Crypto tokens like bitcoin lost as much as twelve percent of the total market cap as stockbrokers reacted distressfully to the most recent United States Consumer Price Index review indicating that inflation is continuing to rise since May.

Following the mentioned lending platform’s proclamation was an order in April where Celsius announced that investors who are non – accredited are prohibited from transferring their assets.

The company’s crypto products are sought-after among crypto enthusiasts, and they provide earnings on deposits of approximately seventeen percent. This is larger compared to those offered by most financial institutions such as banks.

Throughout the time when digital asset investors are overwhelmed by the bad news, there were various opinions from different market analysts and observers. Several condemned the firm’s decision; however, others think that it was a move to protect their consumers’ funds.

Аналитики о приостановке вывода средств с платформы Celsius; BTC упал ниже 23 тысяч долларов СШАAccording to the co-founder of Apostro – a “risk management platform that prevents economical smart contract exploits by enforcing safe economical restrictions” – Kate Kurbanova, even if Celsius’ move is not uncommon, it will unquestionably affect the firm’s clients and the company’s goal to utilize centralized financial platform because such occurrence in the centralized financial institution has been happening.

Kate, then, explained that the decision was put through during the 2020’s Black Thursday since cryptocurrencies’ prices dropped drastically at that time and made an avalanche of withdrawals on lending institutions, and their customers lost their investments.

Additionally, Kurbanova emphasized that the clients are choosing whatever risks they think of as reasonable and bearable. These include liquidations that involve risks, and strategies on decentralized applications but with the feature of allowing the users to withdraw their investments at one’s convenience.

Customers even consider utilizing centralized platforms wherein it is more certain when it comes to security, but with a downside of their money being frozen for a definite length of time.

Other industry observers found a similarity regarding the collapse of terraUSD (UST) token during the middle of May, where it drove the prices of other relative cryptocurrencies like LUNA to plummet by around one hundred percent. It also lead the Decentralized Finance’s (DeFi’s) market value to dive by USD 28B.

As per the explanation of the Vice President of WeWay (a blockchain and encryption communication technology company) and Ukrainian entrepreneur, Vadym Synegin, cryptocurrency enthusiasts easily get disturbed every single time negative news or phenomenon about the industry is mentioned.

The businessman furtherly explained that the current cryptocurrency industry responds to the panic scenarios incompetently.

Several crypto analysts suggested that Celsius had options for more competent strategies, in order to offer profit to their customers.

Austin Kimm, the Co-founder and Managing Director of Strategy of expressed that looking for liquid assets that can yield a return of USD 1 billion is more feasible than looking for other liquid assets that can make a USD 30 B profit. As per Kimm, the sole answer to the problem is by switching off deposits or moving them into a less liquid form like real estate, or cryptocurrency mining instruments.

At the same time, the Chief Executive Officer of Iconium, a private investment company that invests in digital assets and projects that will lead the decentralized Internet era, Fabio Pezzotti, asserted that Celsius’ decision to pause withdrawals was a proactive move to support the company’s liquidity on staked ether (stETH) token to be stabilized.

Fabio added that there have been rumors regarding Celsius being busted because of Ethereum’s derivative, stETH. According to Pezzotti, Celsius was just forced to pause withdrawals in order to prevent an entire bankruptcy.

For more cryptocurrency news, visit We also have experts that could help you start with your crypto journey.

Fintech unicorn was once an unfamiliar term in the industry with rare sightings around the world. Ten years had passed, this once-atypical concept had developed immensely, becoming more common with almost 200 fintech unicorns across the globe. These new cohorts of unicorns are changing fintech as we know it, competing with traditional banks, equipped with modern and unconventional economic models.


The term “unicorn” per se is nothing but a magical creature, which even in myths and legends are rare to find. The word itself does not ring much of significance in the financial industry. Or so we thought.

In today’s modern financial market, a unicorn isn’t just some mythical creature that we hear from folklores. For investors and business owners, Fintech Unicorns specifically are defined as late-stage startup companies with valued funding of 1 billion USD.

The term Unicorn was first used in fintech in 2013 by Aileen Lee, a U.S. venture capital angel investor and co-founder of Cowboy Ventures, in a TechCrunch article she wrote, entitled “Welcome To The Unicorn Club: Learning from Billion-Dollar Startups.”


At the time the above mentioned article was published, unicorns are rare sightings with relatively small numbers across the globe. However, there were a number of companies who had developed as “super unicorns” as called by Lee, such as Amazon and Google.

Aileen Lee acknowledged in the same article the fact that the term ‘Unicorn’ is not the perfect word to call these companies given that these are actual companies, and unicorns obviously do not exist. “But we like the term because to us, it means something extremely rare, and magical,” Lee explained.


Unsurprisingly, Fintech Unicorns which had made the list from CB insights reaching the $1 billion-mark are mostly coming from 4 countries – the United States of America, Republic of China, United Kingdom, and India.

Even though the rest of the world has shown undeniable innovations in Fintech, many countries are still having a hard time catching up in developing proper strategies to build billion-dollar businesses.

According to Deloitte Touche Tohmatsu Limited, for a nation to successfully nurture businesses that will reached the level of Fintech Unicorns, there are usually four main factors that should be considered:

  1. Attractiveness. To attain global attraction and competitiveness, a Fintech firm should establish and develop edge in the fields of not just finance and technology, but also entrepreneurship.
  2. Capital. Start-ups should ensure proper access to capital, be it from private or public funding, for proper scaling and eventual business growth.
  3. Demand. As the theory goes, more demand means more supply. Being in a country with a well-established name in the market will give an edge for start-ups with an advantage from business-to-customers (B2C) or business-to-businesses (B2B) demand.
  4. Regulations. Lastly, one major element that will help companies to thrive are friendly laws and regulations. Government should impose policies that ensure customer protections and promote business innovation in perfect balance.


Upon creating the term unicorn in her article, Aileen Lee also coined the Unicorn Club which refers to unicorns in general. At that time, the Fintech industry immediately took a grip of the concept.

Рост «финтех-единорогов» и их значение для банковской сферыA number of companies have been called Fintech Unicorns, becoming “members” of the “club”. No need for membership cards or registrations but gives a badge of accomplishment and boost of confidence for businesses.

In today’s market, the population of companies who have reached the “Unicorn-level” in general and in Fintech specifically, have grown immensely, going beyond being called “rare”. As of writing, there are over 1,000 companies who have been listed as Unicorns by CB Insights, divided into different classifications.


In this recent unicorn listing released by CB Insights, Fintech Unicorns took on the spot with the most number of companies listed, with over two-hundred (200) firms included.

Most of the Fintech firms who had reached this milestone were known to have been large contributors when it comes to financial and e-commerce services such as:

Acorns – a financial technology and financial services company based in the United States of America known for micro and robo-investments.

  • Valuation: $1.90B
  • Date Joined: March 9, 2022
  • Country: United States of America
  • City: Irvine

Betterment – an American financial advisory company which delivers online investments and cash management services

  • Valuation: $1.30B
  • Date Joined: September 29, 2021
  • Country: United States of America
  • City: New York

Rapyd Financial Network – a FinTech Company founded in 2016, which operates globally via regulated regional group companies and several additional local entities

  • Valuation: $8.75B
  • Date Joined: December 19, 2019
  • Country: United Kingdom
  • City: London

Razorpay – a company that specializes in payments solution in India that allows businesses to accept, process and disburse payments with its product suite

  • Valuation: $7.50B
  • Date Joined: October 11, 2020
  • Country: India
  • City: Bengaluru

Chime – a Fintech company which provides charge-free online mobile banking services

  • Valuation: $25.00B
  • Date Joined: March 5, 2019
  • Country: United States of America
  • City: San Francisco

Cgtz – a leading Internet finance integrated service platform in China specializing in business-to-customer (B2C) debt investment portal, providing various investments products for the individual and small and medium enterprises

  • Valuation: $2.41B
  • Date Joined: February 17, 2017
  • Country: China
  • City: Hangzhou

Better Holdco, Inc. – an American company that manages a digital platform for mortgage and related services

  • Valuation: $6.00M
  • Date Joined: September 10, 2020
  • Country: United States of America
  • City: New York

A few companies who have been playing in the fields of Fintech, Buy Now, Pay Later, and Cryptocurrency industries had also made the cut including: – a cryptocurrency financial services company which began as the first Bitcoin blockchain explorer in 2011 and later created a cryptocurrency wallet that accounted for 28% of bitcoin transactions between 2012 and 2020

  • Valuation: $14.00M
  • Date Joined: February 17, 2021
  • Country: United Kingdom
  • City: London

Klarna Bank AB – a Swedish fintech company catering digital financial services like online payments

  • Valuation: $45.60B
  • Date Joined: December 12, 2011
  • Country: Sweden
  • City: Stockholm

Amount – a financial institution with a variety of products and services for digital and mobile customer experience.

  • Valuation: $1.00B
  • Date Joined: May 21, 2021
  • Country: United States of America
  • City: Chicago

Plaid – a financial services company that builds data transfer network empowering fintech and related products

  • Valuation: $5B
  • Date Joined: December 11, 2018
  • Country: United States of America
  • City: San Francisco

Anchorage Digital – a crypto-asset platform and infrastructure provider dealing with holding, investing, and infrastructure for cryptocurrency and crypto-related products

  • Valuation: $00B
  • Date Joined: December 15, 2021
  • Country: United States of America
  • City: San Francisco

Kraken – cryptocurrency exchange and bank based in the United States of America, founded in 2011

  • Valuation: $2.92B
  • Date Joined: June 25, 2019
  • Country: United States of America
  • City: San Francisco

Moonpay – also a digital trading platform for buying and selling cryptocurrencies

  • Valuation: $3.4B
  • Date Joined: November 22, 2021
  • Country: United States of America
  • City: Miami

There are also a number of names that might be new in our ears such as:

Happy Money – a lending company that develops and delivers financial products and services

  • Valuation: $1.15B
  • Date Joined: February 8, 2022
  • Country: United States of America
  • City: Tustin

MobileCoin – a peer-to-peer cryptocurrency platform founded in 2017 branding itself as the first carbon-negative cryptocurrency

  • Valuation: $1.06B
  • Date Joined: July 7, 2021
  • Country: United States of America
  • City: San Francisco

M1 Finance – an American firm founded in 2015, that offers a robo-advisory investment platform with brokerage accounts, digital checking accounts, and lines of credit

  • Valuation: $1.45B
  • Date Joined: July 14, 2021
  • Country: United States of America
  • City: Chicago

Mercury – a financial firm that offers services for startup companies and investors

  • Valuation: $1.60B
  • Date Joined: July 3, 2021
  • Country: United States of America
  • City: San Francisco


As many countries realize the significant factor the Fintech sector contributes in terms of economic advancement, we may see a future of the Fintech market with an intermixed leaderboard for the top list of Fintech Unicorns. This is also coming from the fact that many of these countries are starting to establish business and economic models that promote further technological advancement and innovations.

Рост «финтех-единорогов» и их значение для банковской сферыWhen talking about rising countries that may alter the course of Fintech leaderboards in the future, there are two nations that experts are looking into – Brazil and Malaysia.

Home to over three hundred (300) Financial technology companies and holding the title of being the second largest fintech hotspot in Latin America, Brazil could soon produce billion-dollar fintech unicorns. According to some analysts, the financial market of Brazil seems to be going into the right track of development.

Innovations could be expected as the Central Bank of Brazil takes proper actions supporting market competitiveness and promoting financial education. The Central Bank has also started the establishment of open banking early last 20, which was deemed as a favorable action for many fintech companies.

On the opposite side of the globe, many finance experts are looking forward to how Malaysia would rise into the future. Given the country’s huge portion with unbanked and underbanked areas, Malaysia is deemed as an opportunity-haven for fintech.

More so, one key factor in the country is its high rates in terms of internet penetration. With the recent data available, almost 50% of Malaysia’s financial sector are companies that specialize in online products and mobile services.

As these countries work on rectifying their economic strategies, it will be a scene worth-to-watch which nation will be the next home for fintech unicorns.


The number of unicorns, in general, has been immensely growing since the term was used by Aileen Lee almost a decade ago. As of June 2022, there are over 1,100 unicorn companies under the list by CB Insights.

Based on the recent study made by Crunchbase early this year, the general demand for sound investments attracted businessowners to invest into start-up companies, helping them into becoming unicorns by reaching the 1billion-dollar mark.

This same study indicated that numbers of unicorns show fintech hubs and crypto companies usually rose in valuation during the initial phase of fundings. Based on Crunhbase’s own unicorn list, over twenty Fintech companies reached the $1 billion-mark last 2021 during the early phase, while sixteen crypto hubs did the same.

For now, how the number of unicorn club ‘members’ will change in the future is not certain. A number of studies suggested that the sudden upsurge of unicorns last year 2020 and 2021 was a surprising scene in Fintech, indicating that this might result in a more challenging fund accumulation.

There were also some indications that reaching the unicorn-level of funds may not be as huge as many see it to be. It has been suggested that the mere chance of earning this label might not be enough to draw investors without proper outputs from the companies.

The United Kingdom government is set to release new restriction frameworks for cryptocurrency and related businesses. The rest of the industry hopes that this will provide more clarity to fill in the current gaps and loopholes.

Early this April 2022, Her Majesty’s (HM) Treasury of the United Kingdom publicized that the government’s economic and finance ministry is on its planning phase for a new framework for stablecoin regulations.

Британское криптосообщество жаждет более четкого плана регулирования стейблкоиновThey announced that with this soon-to-be-released restriction package, stablecoins will be regulated under the U.K.’s current payment framework as the beginning of the composite initiative from the government to build a crypto hub with a vigorous compliance process.

What does this mean for stablecoin business providers?

Generally, following the payment regulatory framework created in 2017 would entail that stablecoin providers should be required to register their ventures with the U.K.’s financial regulator called FCA or Financial Conduct Authority. This would mean further compliance with necessary conditions and following restrictions specific to payment transactions and services.

For the Innovate UK Award Winner Kene Ezeji-Okoye, the current President of Millicent (a stablecoin research company from the U.K.), this announcement from the financial ministry could potentially provide the long-waited clarity on how crypto-business such as Millicent could maintain compliance with the government.

The current business model of Millicent is covered under the current regulatory system of the FCA for digital currencies. However, given that the company plans to expand in owning accountability over public’s cryptographic functions, Millicent could then be considered as a crypto-asset company with supposedly different laws and regulations to comply with.

Kene Ezeji-Okoye, together with other companies and the rest of the crypto community, is hopeful that the incoming rules and regulations for stablecoins will soon fill in the gaps for business owner compliance.


The United Kingdom government has previously made it clear its goal for the crypto industry – to create a global hub for crypto-related technologies and businesses. Together with this ambition, they have announced a series of projects, including legislations that will acknowledge and legitimize stablecoins as payments for transactions and services, among others.

This ambition received a warm welcome not just from the public, but also from many business providers, even regulators.

For Gemini, a U.K.-based cryptocurrency exchange company and a stablecoin provider, optimistically applauded the U.K. authorities for having the initiative in manufacturing regulatory packages for stablecoins. They pointed out that the upward trend of stablecoin usage in the industry clearly summons the government to do so.

A representative from Tether concurred with this statement from the fellow stablecoin company, adding that the United Kingdom could be one of the pioneering nations to build proper regulatory guidance on this kind of crypto asset.

Correspondingly, regulators have the same positive feedback on this move by the U.K. financial authorities.

Simon Cohen of Ontier LLP, a global crypto law firm, asserted how they greatly appreciate the U.K government for acknowledging the significance of robust restrictions for cryptocurrencies and other related digital assets.

Back in year the 2019, Financial Conduct Authority stated that crypto providers involved in international transactions should comply with payment-related laws, but the digital assets itself would not be covered over by the regulations. This is expected to change with the recent announced legislation by the HM Treasury.

The FCA recently clarified that they greatly welcome any plans by the government in manufacturing new laws and regulations for cryptocurrencies, asserting that they would continue to support the authorities.


Last 2021, Her Majesty’s (HM) Treasury of the United Kingdom has performed various research and consultations on stablecoins, for which results were released together with the recent announcement for future regulatory framework.

Британское криптосообщество жаждет более четкого плана регулирования стейблкоиновThe studies made reported that even though not all crypto issuers can comply with all the standard restrictions, there was a general alignment that those stablecoins founded by a single fiat currency should be compliant with the conditions specific for digital payments and related transactions.

The HM Treasury aims to ensure that all crypto issuers will be registered with the FCA, complying with its rules and safety measures. This means that the soon-to-be-released framework would not only alter the current payments regulatory packages, but also the rules for electronic money (or e-money) to expand the scope including stablecoins.

However, the report has not yet detailed out every requirement for stablecoins but mentions that the development will be advanced with the aid of the U.K.’s Bank of England and Payment Systems Regulator.

Based on the Treasury’s consultation report, there is currently a general understanding among providers that stablecoins and related activities should follow the compliance measures set by the Bank of England. For instance, once a company is identified as compliant with the requirements under the Banking Act, the company would then be classified as systemic, which should be controlled under the FCA and the Bank of England.

The report mentioned that all stablecoins backed by fiat currency, either single or multiple, would be under the scope of the forthcoming regulatory framework.

Meanwhile, algorithmic stablecoins, or those founded by assets aside from fiat, should not be covered. These algorithmic coins are decentralized digital assets created to maintain its value using codes and programming, controlling its supply based on its price. In essence, these are expected to be self-sufficient without any collateral.

In relation to this, many experts pointed out that it would really be a great challenge for policymakers to apply or pattern rules from the current regulations to these algorithmic coins, given its complexity and distinctive nature.


Even with the current pacing that the U.K. government is taking in terms of regulating cryptocurrencies, there is still too much work to be done.

Just early this year, several studies have shown that the United Kingdom was relatively slow in stepping into cryptocurrencies, in comparison with the other nations, especially from both Asia and Middle East.

A spokesperson from YouGov, a global public opinion and research data company, pointed out in a study that even though huge growth is anticipated for crypto space in the U.K. market, further potential is being held back by safety and compliance issues.

In the same study, they clarified that even with the recent news from the U.K government for its plans related to the crypto industry, it is still a question mark whether these would be enough to provide assurance and gain public trust.


Британское криптосообщество жаждет более четкого плана регулирования стейблкоиновEven with the recent public announcement by the U.K government on its plans, there is still lack of coherence and clear view on what really to expect, leaving the rest of the industry yearning for more clarity

In the previously released consultation report, the HM Treasury clarified that the plans they currently have in progress will be developed with utmost assurance of flexibility over the regulatory frameworks given that definite descriptions could be rapidly left behind by the fast-changing industry.

Kene Ezeji-Okoye and many other company owners very much anticipate what would the U.K. government provide in the near future, and which questions will be answered favorably.

How would stablecoins be defined? Which coins will be legitimized as a payment method? Which coins would be covered in which set of regulations?

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All financial transactions are regulated by a multitude of laws, legal acts, and rules that all legitimate companies must comply with. All financial systems use certain principles to verify their users and customers, allowing them to fight money laundering and illegal money circulation more effectively.

Understanding the modern principles of how financial institutions work is useful not only for business representatives and bank employees but also for ordinary users. Therefore, in this article, we will analyze in detail what is behind the abbreviations AML and KYC, which are actively used in business.


AML is a system of laws and principles aimed at preventing and detecting money laundering and terrorism financing. The abbreviation stands for “Anti-Money Laundering”. For most financial institutions, AML is a set of processes and approaches based on the analysis of aggregated data about users and their financial activities.

Simply put, AML is a set of steps financial institutions must take to prevent criminals from using their services to launder illicit money or finance terrorism.

AML is also sometimes referred to as “anti-laundering laws” because they are designed to prevent criminals from “laundering” incomes received by illegal means and financing criminal activities.

AML и KYC: о сложных понятиях простыми словамиVarious tools, internal procedures, and control measures are used for this purpose, such as monitoring financial transactions and detecting suspicious activity.

In particular, automated analytical systems analyze the activities of a particular user and determine whether the available information about the client corresponds to the transactions that he or she performs.

In the case that the system fixes a transaction that does not correspond to the particular user’s standard behavior, it signals the need for verification.

The concept of AML first began to be widely used in 1989, after the intergovernmental organization FATF (Financial Action Task Force) was founded in Paris to develop anti-money laundering measures.

This organization develops international standards related to the prevention of money laundering, helps their implementation in different countries, and counteracts the financing of terrorism.


AML principles are being implemented by many states at the national level and in most cases, the recommendations and standards of the FATF are taken as the basis. An important part of the process is the rejection of anonymous financial transactions and instead, fighting for their transparency. That is, financial institutions can and even must monitor the activities of their customers, identify suspicious transactions and report them to the appropriate authorities.

For conducting financial activities in the European Union, it is important to know that since 2015 the EU has adopted a modernized regulatory framework that includes several anti-money laundering (AMLD) directives. The most recent 6th directive, which entered into force in June 2021, includes provisions that increase liability for financial crimes, expand the list of such crimes, imply closer cooperation between European states in fighting money laundering, etc.


The abbreviation KYC stands for “Know Your Customer”. This principle obliges financial institutions to identify users before making a transaction.

AML и KYC: о сложных понятиях простыми словамиAccording to the KYC rules, anonymous financial transactions are illegal.

User identification can serve various purposes, namely:

  • helps companies to better understand their clients and their characteristics ;
  • allows companies to monitor all transactions;
  • increases client’s confidence in financial service providers;
  • reduces the risk of financial fraud;
  • helps the fight against money laundering, terrorist financing, bribery, and corruption.

The concept of KYC was implemented in 2016. It was introduced by the Financial Crimes Enforcement Agency (FinCEN) of the US Department of the Treasury. It was this agency that first suggested the use of formal KYC requirements.

However, even today there are no particular standards regarding what kind of user data should be requested. Each service and each company decides this individually, so the identification and verification procedures (checking the validity of the entered data) often differ significantly.

In most cases, clients are asked to provide:

  • full name;
  • date of birth;
  • contact information (phone number, e-mail);
  • residential address;
  • an identification document with a photo issued by a public authority(passport, driver’s license, etc.).

As a rule, the specified data will have to be confirmed by providing a photo or a scanned copy of the relevant documents, as well as verifying the phone number via SMS. Additionally, online interviews may be conducted. The purpose of all these activities is to collect and verify customer data.

Today, KYC protocols are being implemented not only by traditional financial institutions, such as banks and insurance companies but also by crypto companies.

For example, the Binance cryptocurrency exchange and blockchain ecosystem require users to provide their full name, date of birth, and phone number for registration, and account verification requires identity confirmation in the form of a scanned copy of an identification document with a photo (passport, driver’s license, etc.) and a selfie with them.

Differences between KYC and AML

Despite the obvious difference, the concepts of KYC and AML are regularly confused. In a broad sense, KYC is only a part of the measures taken to combat money laundering. Other elements of the AML principles are CDD – Customer Due Diligence, EDD – Enhanced Due Diligence, risk assessment and continuous monitoring of transactions, internal audit and control, and more.

To follow the principles of AML, companies have to use a complex approach, which necessarily means the implementation of the KYC algorithm.

According to international analytics company LexisNexis Risk Solutions, global financial institutions spend more and more money every year to combat money laundering.

So, in 2020 this amount was about $181 billion, and in 2021 it has already increased to about $214 billion (source: -tcoc-global-study)


Particular dissatisfaction with the introduction of the principles of KYC and AML is expressed by users of blockchain technologies. In their opinion, the need for identification and verification discredits the very basis of their work, as they were initially presented as anonymous. On the other hand, the possibility to make financial transactions anonymously could not fail to attract scammers, which endangered honest users.

AML и KYC: о сложных понятиях простыми словамиTherefore, cryptocurrency exchange services and other players in the crypto industry are forced to agree with the requirements of regulatory authorities and implement the KYC principle for user identification, as well as AML protocols for monitoring suspicious transactions.

Very often users are also dissatisfied with the need to go through multi-stage identity verification due to the length and complexity of all procedures. So, you can regularly meet complaints from dissatisfied customers about an inability to register on a particular service, verify an account, or pass the security control. Financial institutions are trying to deal with these difficulties and disadvantages.

Also, many clients of financial institutions express concerns about the safety of their personal data. Of course, banks, crypto-exchanges, and other services promise to ensure their security, but leaks occur and as a result, private information falls into the hands of fraudsters.

Despite some shortcomings and imperfections of the measures taken, as well as despite the dissatisfaction of users, the fact remains that the measures to combat money laundering and prevent financial crimes do work. Therefore, in the nearest future, they will likely not only be maintained but even tightened.

In nearly two decades, the U.S. dollar and Euro are close to parity for the first time. Here’s what to know and how it would impact the economy.

Due to the recent economic tremors in Europe, the Euro has recently continued with its five-year decline, raising the possibility of parity with the U.S. dollar for the first time in 20 years.

This wrestle between the two largest and most traded currencies globally is now coming to the closest fight after a long time with the recent 7% slide of the Euro against the U.S. dollar.

However, specialists are still divided. Will we really get the long-waited euro-dollar parity soon? How soon is soon? How will this impact the economy, and what will it mean for investors?

The Decline of Euro Causes Nearing Parity versus DollarEarly this May 2022, the value of 1 euro is playing around 1.05 U.S. dollars and eventually slid down to 1.03 U.S. dollars the following week.

This continuous decline of the Euro is deemed to be a result of market disinclination due to public concerns related to multiple economic tremors.

These primarily include the devastating war between Ukraine and Russia, continuous upstream inflation rate, issues in business logistics, lack of growth, and strengthening of financial regulations, which have caused investors aversion, leaning towards traditional and much safer assets, consequently resulting in a much-strengthened U.S. dollar.

On top of this, changes in financial regulations within the U.S. and European central banks impacted this narrowing of euro-dollar parity.

Last May 2022, the U.S. Federal Reserve increased its loan rates by 0.5 % for the second time this year as it expects a rise in the inflation rate.

Recently, the Chair of the Federal Reserve of the United States, Jerome Powell, reaffirmed the central bank’s goal to lessen inflation and pull it down closer to 2 percent. Powell announced that they would continue raising loan rates as necessary until inflation declines to a much more controllable measure.

On the contrary, the European Central Bank has not yet made any increments to their interest rates in spite of Europe’s continuous inflation hike across states. Although the ECB has acknowledged how the unrestrained decline of the Euro impacts market stability which causes price hikes for U.S.-sourced products, there has been no sign of immediate actions in place.


Aleksandar Tomic, an economist from Boston College, mentioned that the parity between the two currencies might be sooner than most think and could possibly happen within the following months.

Market experts indicated that the way to a euro-dollar parity might need another major decline in the European economy relative to the U.S., something similar to what happened after the war between Russia and Ukraine.

Samuel Zief from JPMorgan pointed out that even though Europe would be shaken by something similar, the supposed parity between the two currencies will be the worst-case scenario.

Zief also noted that the U.S Fed’s hawkish increase in interest rates already covers the supposed hike for the next two years, which does not look good for the Euro.

Specialists from the Canadian Bank of Montreal suggested that aside from changes in monetary regulations between the Federal Reserves and the ECB, there are also the energy supply deficiencies and payment fluctuations that are pulling down the value of the Euro.



Since the start of 2022, the dollar index has been skyrocketing by around 8 percent, even with the subsequent interest rate increase by the Fed.

George Sarravelos from Deutsche Bank pointed out that the industry is now at the point where further monetary and economic tremors erode the Fed’s predictions. At the same time, the rest of the world, specifically Europe, faces the consequences.

Sarravelos suggested that the European economy will continue to surpass the U.S. and dodge any recession, as opposed to what the majority expects.

The Decline of Euro Causes Nearing Parity versus DollarAlthough the recent study by Deutsche Bank specified that the American dollar is at its highest peak since the pandemic, their predictive data implies that the euro-dollar valuation would not go down to reach parity.



Although many currency specialists are still doubtful that the market will reach the long-waited euro-dollar parity, a massive portion of the industry expects the European market to continue the downstream path.

Several economists noted that the recent aggressive action by the European Central Bank is still not at par with that of the U.S. Fed, insufficient to knock off the inflation hike across Europe.

Some experts suggested that a much less hostile approach should be expected from the ECB, with incremental turns in increasing borrowing rates.

Jonas Goltermann from Capital Economics argued that the constant decline of the European economy with its vulnerability in the local and global market clearly implies further downstream for the Euro against the U.S. dollar. He mentioned that the euro-dollar parity could be expected by the end of 2022, in contrast to the Deutsche Bank’s forecast data.

The European Commission had previously released its proposed set of rules for Markets in Crypto-Assets (or MicA), which is expected to simplify crypto-related regulations.

There is known around the globe that there is a considerable gap in our current financial regulations, specifically on how many crypto-related activities are not covered by the existing legacy restrictions. Europe and other countries worldwide have been exerting efforts to fill these gaps. With this goal in mind, the E.U. Union has recently released its proposed restriction framework for MiCA or Markets in Crypto-Assets.

The suggested European regulation on Markets in Crypto Assets, or MiCA, was previously discussed in the country’s Committee on Economic and Monetary Affairs. MiCA is essentially a set of existing European laws, amplified for crypto-assets and amended for consistency and proportionality. This framework objectifies manufacturing a mechanism that grants an innovative market while addressing risks that new technologies present and warranting a proposition consistent across markets.

The MiCA Framework: Europe's Proposal for Crypto RegulationsThe MiCA project is just a part of the many strategies created to ensure that the European financial industry will adapt to the growing virtual space. This proposal mainly discusses stablecoins which it subcategorizes as “asset-referenced tokens.”

Unlike USDC and USDT, which are only backed by the U.S. dollar, these tokens are built on the foundation of multiple fiat currencies or blockchain assets.

With MiCA, once a blockchain business is given a license in any of the 27 European states, it will be applicable in all other states, meaning the firm could do its venture without additional local approvals. With this, rapid growth for crypto businesses is expected to be vastly simplified.

However, many experts have noted how the MiCA regulations are different from other countries.

For example, although the United States of America has built multiple crypto-related laws in the past years, it has no identifiable one which matches MiCA. On the other hand, the Chinese government has recently banned crypto activities while creating its own central bank digital currency (CBDC).

The European Parliament cleared that the European Union is trying a different approach with its regulations, given the lack of harmony across the Union, with countries having inconsistent financial mechanisms.

The scope of the recent MiCA proposal only covers stablecoins and other cryptocurrencies such as bitcoin and ether. Central Bank Digital Currencies or CBDCs, security and deposit tokens, and other crypto-related assets are not in scope.

Even though the MiCA framework might sound enticing for crypto businesses, given that it will allow licenses to be applicable across different states, there have been some concerns from the industry on how it will impact the E.U. crypto market in other manners. Some have specified that even though license and legal assurance sounds attractive enough, stricter rules and mandates under MiCA might impede investments and innovations.


With the current prerogative that each European states have, various approaches in terms of crypto directives are being applied in each country. Each state had to create its bylaws and mandates for crypto tokens, in line with a few guidelines that all had to adhere to.

In the past few years, countries across Europe have initiated regulatory implementations primarily compelled by two factors:

  1. The VASP or virtual asset service providers guidance, which was published in 2019.
  2. The Anti-money Laundering law or AMLD5 created by the European Union in 2020.

These two served as guidelines to each state, providing objectives that should be attained but leaving the countries to manufacture laws on their own independently.

These differences each European country has in their crypto-related regulations have confused some industry players. Do they have to apply for licenses in almost 30 different states to be able to venture into Europe? How will they be able to leverage the freedom of movement for business activities?

Bitpanda, an Austrian cryptocurrency exchange company currently ventures across 37 states, has had to tediously work on multiple licenses and approvals locally within Europe.

The European Parliament mentioned that the MiCA initiative targets to guarantee that the European market will be able to keep up with the growing business of cryptocurrencies. They indicated that security for investors and customers should be upheld, with a competent market leveled with enough resources for the industry to understand and comply with.


The recently published MiCA framework generally covers digital assets, describing them as virtual versions or characterizations of money value, cached and used in digital transactions through blockchain technology. It subcategorizes these crypto-assets as below:

  • Asset-reference tokens – are broadly defined as tokens built on the foundation of multiple fiat currencies. The most famous example is Libra, renamed Diem, known to the public since 2019 as a stablecoin introduced by Facebook.
  • E-Money Token – pertains to stablecoins created to be valued the same as fiat currencies. Samples are USDC and USDT created under the U.S. dollar.
  • Utility Tokens – assets created to access digital transactions, only accepted by the developer of that asset, like the BAT or Basic Attention Token owned by the Brave, a web browser company.

The MiCA Framework: Europe's Proposal for Crypto RegulationsUnder MiCA, business players of these cryptocurrency categories in Europe should obtain approvals and licenses in their respective local financial government bodies by sending white paper 20 days in advance.

In the crypto industry, a white paper is a business document with an investment roadmap created prior to any business release. The local government will then have the authority to approve and allow the emission of those assets.

Businesses that cater services related to these digital tokens must obtain a license in any European state. Once approval from any local government is obtained in accordance with the European laws, the expansion of crypto ventures will be allowed in other states without any additional licenses. With this, the local custom-made regulations in each state would no longer be applied.

With MiCA, countries with strong regulations and licensing processes for digital tokens will have a much easier and more efficient mechanism, following the new conditions applicable across Europe.

Despite this, the European Union clarified that security measures and compliance would not be neglected.

Based on the assessment by the European Union, the price of a white paper under MiCA would be much higher for crypto businesses, with compliance costs of around 4 thousand USD to 87 thousand USD, depending on complexity and the level of legal interventions necessary.

With this, industry experts raised concerns, pointing out that growing licensing costs might result in investors moving to other states outside Europe.


Back in the year 2019, Facebook (now called Meta Platforms) announced its Libra initiative, a stablecoin supposedly to be founded under multiple platforms and multiple fiat currencies. However, upon its announcement, the U.S. government raised scrutiny and mentioned that they had to study the impact of this project, ordering Facebook to halt the plan. Consequently, the company then announced that the vision would no longer continue but eventually rebranded the project under the name of Diem.

With the proposed MiCA framework, certain conditions and requirements for all stablecoin businesses will be applied, like the required capital funds ownership of 400 thousand Euros for all stablecoin business owners.

The proposal also detailed incremental conditions for “significant” business owners, defined as any business having activities of at least 500 thousand a day and at least 1 billion market cap.

The MiCA Framework: Europe's Proposal for Crypto RegulationsThese so-called significant businesses, such as USDC and USDT, will require additional conditions under MiCA, including having funds equivalent to 3 percent of its reserved assets.

For example, the stablecoin USDT, which currently has 25 billion USD, would need to warrant at least 75 million USD as its capital funds. As of writing, USDT has a net supply of only 72 million U.S. dollars.

Few business players mentioned that these additional requirements for considered significant users seem to be too much.

The MiCA proposal agreed and mentioned cautions with these specific conditions for significant users since these could potentially result in inconsistencies with its objective to secure continuous business innovation in the industry. However, the framework somehow justified this, pointing out the apparent risks to financial freedom and market stability.

However, it is deemed that the MiCA proposal would not be altered as of yet, given the recent issues for global stablecoins in the market. Just recently, USDT and USDC have received criticisms from both U.S. and E.U. markets regarding their unverified reserves.

Currently, most trading partners of Binance with a massive volume of transactions involve a stablecoin. With this, professionals indicated that regulations brought by MiCA would negatively impact the competitiveness of the European market. On the contrary, other specialists countered that the most significant matter is the promise of legal security and should be upheld over the state of stable coins.

With the current state of the MiCA project, effectivity is not expected until 2023. Until then, the status quo will continue, where each state must assess and create its own custom-made laws.