Digital Assets: Compliance Considerations and Technology Integration

NOTNeed help navigating the digital asset learning curve? Get our practical, tech-focused tips here.

Welcome back to our blog series on digital assets, brought to you by securities compliance advisory firm Joot and MeetAmi Innovations, Canada’s leading wealth management platform providing access to investing and learning in digital assets. The first article from our content partnership explored the opportunities and challenges of adopting digital assets for investment advisory firms. In this article, we dig deeper into relevant considerations and compliance issues related to technology integration as you weigh the pros and cons of adopting digital assets.

To start, let’s discuss the value of continuing education in this space.

How does technology work as a teaching and learning tool?

When it comes to continuing education, investment advisory firms have a dual purpose: fostering continuous professional development and guiding clients on the allocation of digital assets in their portfolios. This learning process includes, among other things, understanding how

  1. exchanges used by retail investors comply with regulatory obligations and
  2. institutional investors are developing compliance protocols in their practices.

Combined with a short- and long-term investment plan, ongoing training helps ensure compliance is in step with business and industry changes. Bo Howell, CEO of Joot and Managing Director of FinTech Law, recently gave a presentation on the Cincinnati Bar Association’s Continuing Legal Education entitled “Building Blocks of Crypto”. This webinar provided general information on blockchain technology and generated audience participation to weigh in on the future of this and other emerging technologies. Bo offered this advice to investment advisors and fund managers interested in developing crypto investment products: “Learn. Learn. Learn. RIAs and fund managers can’t just chase another investment product They should have a working knowledge of how the underlying technology works, the risks to that technology (e.g., a blockchain fork or a pending protocol upgrade), and the ownership rights attached to digital assets Ongoing education in this rapidly changing space is crucial for industry participants to stay engaged and compliant.

Where is the disconnect?

Much of the digital asset movement has been designed and embraced by consumers for self-management, while advisors need tools to manage accounts en masse and report into traditional systems. With over 300 million crypto users (a number expected to reach one billion by the end of 2022), over 400 global exchanges, and self-directed learning, the digital asset environment has always been consumer-driven. and everywhere “. “Advisors must be empowered to interact with digital assets on behalf of their clients. This empowerment comes from continuous learning and education, support, and simulated market interaction in a compliant, easy-to-learn ecosystem.

AmiLearn is a new learning model for wealth advisors who want to master this new asset class. The platform consists of small bites, curated news, masterclasses, and communities of practice, all recorded on the blockchain. The platform was designed to support this intense and ever-changing learning curve.

Train advisors on key fiduciary duties

Technology will play a key role in training advisors on new fiduciary duties, including know-your-client (KYC) standards as well as tax, custody and insurance issues. While local, federal and global rules, regulations and regulators and entire regulatory bodies are still being developed and understood, advisors must stay abreast of regulatory developments to fulfill their fiduciary duty. and effectively manage digital assets. Regular exposure to breaking news, legal precedents (domestic and international), technological advances and projects in development is paramount for advisors when implementing risk management strategies.

Two other areas that often trip up product sponsors are anti-money laundering (AML) regulations and the cybersecurity requirements needed to protect assets. These regulatory issues need to be considered before investment advisers and fund managers develop and launch a product or invest client assets in cryptocurrencies and other digital assets. Many still regard cryptocurrencies as nothing more than an anonymous method of illegal money transaction, although this myth has been dispelled thanks to tracking techniques and wallet transparency. Cybersecurity issues mainly arise when transitioning from decentralized platforms (blockchains) to traditional financial systems or transactions between separate blockchains. The very nature of decentralization lends itself to more secure networks of nodes. Advisors and their companies should consult with cybersecurity experts who focus specifically on the application in question.

The path to follow

The influence of technology in understanding and learning about digital assets cannot be underestimated. In a digital world that relies on cryptography, decentralization, international cooperation, transparency and a plethora of advanced technologies, traditional ways of learning simply cannot keep up with – or fully express – a true understanding of the digital asset ecosystem.

Stay tuned for more relevant content in our digital asset series. In the meantime, contact MeetAmi and Joot with any questions or comments. We would love to hear from you.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

About Shirley L. Kreger

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