The Truth About Crypto Regulatory Licenses
Why Licenses Won't Save You
"We hold a government license - that's how you know we're trustworthy"
The alarm bells started going off in my head.
An OTC desk told me this right after asking for certain (standard) documentation. We had not even moved to the next step of actually observing, or inspecting infrastructure.
I wish I could tell you this was a no-name firm.
Remember When Crypto Blew Up in 2022?
Unfortunately, many crypto entities have gotten used to hiding information.
It was only a few years ago that swaths of OTC desks failed. Many of them holding various licenses…
Genesis (SEC/FINRA BD + BitLicense + MTLs), BlockFi (FinCEN MSB + MTLs), Voyager, FTX OTC, Bittrex OTC, Coinflex - every one held multiple licenses and still imploded.
Billions of dollars lost.
Why Licenses Fall Short
I think The reason why licenses fall short is simple:
The industry is moving quickly.
This fast moving industry is built on a whole new set of technical architecture. Products trade and settle on this new set of architecture.
So, is this the fault of regulators? No.
We are in a natural phase of our industry given its novelty.
As an example - regarding custody, we looked at a series of regulations and how clear they were regarding material areas of a crypto operation. You can find the link here. Spoiler: things are largely unclear (though there are some standouts in clarity).
A License is a Floor, Not a Guarantee
All of this is not to say an entity should not be licensed. An entity in a certain jurisdiction should have the appropriate paperwork.
Real diligence means going much deeper.
Financial health
Access controls
Settlement rails
Risk management protocols
These are good starting points.
Risk Management is Necessary, But Doesn’t Have to Be Overwhelming
We built our playbooks to help investors sleep at night, and for service providers to best fill their client’s needs.
Investors: counterparty risk assessments, deep-dive ODD, custody audits.
Service Providers: the same frameworks turned inside-out—showing you exactly what sophisticated clients will scrutinize (and how to pass with flying colors).
Curious how we can lighten your risk load?
To learn more, contact us at info@digopp.group.
What is Counterparty Catalogue?
Counterparty Catalogue is a discovery platform built for institutional investors to navigate the crypto ecosystem, including service providers for custody, trading, legal, and more.
Sign up here to access profiles, due diligence reports, and research.
What You Can Do:
Explore Counterparty Profiles: Discover key details on digital asset service providers, their products, and more.
Review Credentials: DigOpp independently verifies licenses, certifications, audits, and more, adding credibility and transparency to every listing. Review what’s been verified by us.
Send Introductions: Easily connect with service providers and begin discussions.
Rate & Review Providers: Share feedback based on your experiences and read reviews from others.
Access ODD Reports: Request comprehensive third-party operational due diligence (ODD) reports we’ve completed:
Research: See our Global Crypto License Comparison, a side-by-side view of crypto licensing requirements across major jurisdictions. Use this resource to quickly assess the strengths and gaps in global crypto regulation.
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