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“Regulators should consider using individual case studies rather than tarring the entire DLT market with the same brush,” says Kriya Patel, managing director of Transact Payments.


Across the world, regulators are struggling to put together constructive policies around the world’s newest financial and technological tool. Distributed ledger technology (DLT) has become synonymous with the cryptocurrency market – which in itself has evolved significantly over the past twelve months with major exchanges now offering derivatives and bitcoin’s trading volumes reaching new heights. But while regulators in some jurisdictions have instigated debates around DLT and cryptocurrencies, others have shied away, seemingly waiting for the market to mature before creating definitive rules. As regulations do develop, those at the tiller must approach the market with thoughtful, specific rules – separating DLT from cryptocurrencies, and recognising the technology’s many other uses. So says Kriya Patel, managing director of Transact Payments, the e-money institution. The firm has benefited from being based in Gibraltar, where the regulator and other bodies have entered discussions on how to best consider the technology. Here, Patel tells bobsguide how the markets are developing, the role regulators should play, and the risks associated with entering crypto markets.

What really sets cryptocurrencies apart from other currencies?

Most notable is its decentralised nature, and the anti-establishment fork it has developed on. There’s also the fact that it isn’t backed by any underlying government or central bank, which has created substantial appeal, interest and demand.

However, investment in a cryptocurrency can be considered speculative – or a trading opportunity – rather than an active contestant in the competition to match up to traditional currencies.

Cryptocurrencies allow for a global store and exchange of value, but are volatile in the absence of the traditional central bank/government control. This will carry appeal for some, and pose major concerns for others, resulting in truly divided views.

There’s been plenty of debate from regulators over the last six months, particularly Carney. What role will regulators have with regards to the continuation of the crypto markets?

There are a number of countries whose regulators have introduced policy to regulate DLT rather than just cryptocurrencies, Gibraltar is one such location. We have been fortunate in being able to work closely in the jurisdiction with Government, the regulator, local advisors and legal firms to build a great level of understanding of the sector and the continual evolution that is witnessed. Although cryptocurrencies are the most commonly known use case there are a number of excellent utilities being built on the blockchain and very much driven by resolving weakness in the current systems and infrastructure used today in financial services.

I believe the inclusion of cryptocurrencies in to the scope of 5AMLD and also ensuring that there is greater alignment to certain financial services regulations is an important step in taking the sector into the mainstream. I also believe that this has to be implemented in phases to ensure that over regulation does not stifle innovation. The best way to do this is to set policy specific to the use case of the technology rather than a blanket approach to one set of regulation fits all.

Gibraltar has been setting itself up as a crypto hotspot, what’s behind this?

Gibraltar has been an innovator in many sectors over the many decades – insurance and e-gaming to name a few. The foresight shown to take an early involvement in the DLT sector is yet another example. The regulator has set out a clear framework for DLT companies to follow that ensure the best approach to helping the sector build trust, assurance and a stable platform to build on the many valuable solutions that can be delivered on DLT.

I see this as yet another example of Gibraltar wanting to take the lead by showing a best practice approach to a new business area and building a world class environment of support, infrastructure and opportunity to deliver assured, trusted and end-user focussed solutions built on the underpinning DLT regulatory framework.

By formally accepting cryptocurrency, how should a company’s AML & AFT budget react?

There are risks inherent with anything that moves from an unregulated state to a regulated environment. The underpinning of any regulatory framework for a financial instrument has to be built with a clear and concise method of traceability, transparency and complete compliance with AML and CTF considerations. The incorporation of cryptocurrencies into the compliance requirements of AMLD5 will go a great way in ensuring this happens. The question of increased cost is dependent on involvement or services of connection the company has with cryptocurrency. I do think that the bigger opportunity is the underlying technology, once the cost, time and volume aspects are improved. The use of DLT for smart contracts processed, delivered and access controlled on a global chain, centralised or decentralised based on the ultimate needs it delivers are the future for this sector.

It seems to be catch 22 for crypto. It needs the stability and credibility that regulators (and institutional investment) can provide, but needs to maintain that decentralised nature to have its truest impact. What is the future of cryptocurrency within Europe?

I don’t think being decentralised is a must and actually think this decision stems from the ultimate needs of the solutions being delivered and why they are required. The rule defined to govern any solution will always be important in order for user buy-in and this can be greatly assisted by aligning to established and globally recognised standards related to data management, AML, CTF, consumer protection etc.

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