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Apr 2, 2022

by Guneet Kaur

6 Signs That Regulations Are Coming To Web3 Very Soon

Although web3 has a large amount of decentralization, laws are swiftly approaching this embryonic field for AML and Compliance experts who feel they missed the early days of fighting financial crime in the crypto and blockchain industries.

Here are six reasons- why I believe sweeping rules in DeFi, NFT, and possibly DAOs will be implemented. However, consider this article as an educational guide only! Do your own research before relying on any information provided here since Cryptoknowmics does not control third-party web links used in this article.

NFT's 'Rug Pull' scheme

The US Justice Department has charged two people in connection with the NFT's 'Rug Pull' scheme: Two young adults could face up to 20 years in prison after attempting to steal over $1 million from a phony NFT launch by hiding behind their internet aliases.

They shut off all social media and closed the discord once the project was completed. You may not be aware that New York has a US Department of Homeland Security Dark Web & Cryptocurrency Task Force that collaborates closely with the Internal Revenue Service (IRS).

Infrastructure Investment and Jobs Act

The US "Infrastructure Investment and Jobs Act," passed in November 2021, increased cash reporting rules to include "digital assets" for transactions exceeding $10,000. Details and crucial definitions are still being worked up by Treasury/IRS, and the new rules won't go into force until 2024.

Regulatory actions: UK, USA, and the Middle East regulators

NFTs have already been highlighted in recommendations and proposed rules by the Financial Action Task Force (FATF), the United States, and UAE / Dubai regulators. Dubai appears to be moving toward being a web3 center, which means that laws and licensing requirements will shortly follow, resulting in an increase in crypto compliance jobs.

NFT and DeFi-related functionalities added by blockchain analytics platforms

Several NFT and DeFi-related functionalities are being added by blockchain analytics businesses. TRM Labs immediately followed Chainalysis Inc. in launching a sanctions screening tool for smart contract protocols after partnering with the leading NFT platform Dapper Labs for transaction monitoring.

Elliptic has also worked with key DeFi platforms to aid in the detection of illegal activities in these projects. Solidus Labs has made a name for itself as a viable option for DeFi projects.

The SEC keeping an eye on NFT projects

The Securities and Exchange Commission of the United States is investigating NFT Marketplaces. The SEC has a history of punishing the most extreme ICO ventures, and it appears that they are now focusing their attention on NFT projects.

I believe most of the scrutiny will focus on projects that fractionalize pricey NFTs to provide access and ownership of objects such as crypto punk.

NFT compliance jobs

We've seen NFT compliance positions advertised on Kraken Digital Asset Exchange, Coinbase, and Palm NFT Studio. Dapper Labs was one of the first to hire Lana Schwartzman as Chief Compliance Officer (CCO).

Compliance is a top priority for these businesses, and they're laying the groundwork for long-term business models.

Disclaimer: The views and opinions expressed in this article are for informational purposes only and do not constitute financial, investment, or other advice. Investing in or trading crypto assets comes with a risk of financial loss.

Securities and Exchange Commission (SEC) Chief Compliance Officer (AML) Chief Compliance Officer DeFi NFTs Coinbase for NFTs Crypto Regulation in the US

6 Signs That Regulations Are Coming To Web3 Very Soon

Guneet Kaur

Guneet Kaur is a certified credit and securities analyst. She is MSc Fintech graduate (with distinction) from the University of Stirling, Scotland, United Kingdom. Prior to MSC, she has also done MBA from GNDU (gold medal) and has worked as a global client and partner business manager with Singapore-based MNC. She has written various conference papers and has authored a book titled 'The Magic Of Compounding'. She was the Finalist of the Women in STEM-Lovelace Colloquium that was held in 2019 at the University of Salford, UK, and Royal Bank of Scotland's Hackathon in 2019. Her expertise includes financial modeling, Cryptocurrencies, DeFi, Blockchain, quantitative analysis, academic research, business valuation, business analysis, data visualization, financial fraud, and AML analysis.