Have You Calculated Your Compliance Fees Before the Year Ends?

Failure to comply with regulation can cost you a lot more than just financial losses...

As the end of the year approaches, businesses across industries are taking stock of their spending and evaluating their strategic priorities for the upcoming fiscal year. For companies operating in the crypto and blockchain space, one critical question looms larger than ever: How much have you invested in ensuring your organisation is compliant?

Compliance is no longer just a checkbox or a secondary consideration. It’s a cornerstone of long-term success, operational security and trust in your company. Yet, many organizations underestimate the true cost of non-compliance until it’s too late.

2024 Financial losses by type:

Data collected from various sources suggest that in the last year, CeFi is the largest contributor to losses, indicating a need for enhanced security measures. A staggering proportion of total fraud losses come from central finance, CeFi, emphasizing its vulnerability. The disparity in losses highlights potential areas for targeted prevention strategies. Further, Gaming and Phishing contributed to losses, totalling over $694 million. However, it is not only finances that can be lost as a result of non-compliance.

The Cost of Non-Compliance: More Than Just Fines

Non-compliance in the crypto sector can lead to severe consequences, starting with substantial fines from regulatory authorities. Governments worldwide are tightening their oversight of cryptocurrency transactions, exchanges, and wallets. Falling short of these standards can lead to financial penalties that cripple your bottom line.

But fines are just the tip of the iceberg. A more insidious threat comes from malicious actors who exploit compliance weaknesses. Companies that lack robust compliance protocols are more likely to attract hackers and fraudsters who prey on vulnerabilities. A single breach can lead to:

Monetary losses:

Direct theft or fraud could drain your company’s funds.

Case study: On November 3 2024, MetaWin was hit by a significant exploit leading to the theft of approximately $4 million. The attackers particularly targeted MetaWin’s hot wallets due to their frictionless withdrawal system. While about 95% of users are one again able to make withdrawals, this exploit is highly concerning for sites like MetaWin and their reliance on hot wallets.

Fines for failure to comply:

Receipt of fines from Regulatory authorities as a result of non-compliance of regulatory frameworks and requirements.

Case study: In June 2024, The SEC released a statement announcing that Terraform Labs and Do Kwon will pay over $4.5 billion in fines following a jury verdict finding them liable for years of fraudulent activity involving crypto asset securities. Terraform and Kwon were found to have misled investors about their blockchain and the stability of TerraUSD (UST). This instance has increased the total tally of doled out fines by the SEC to $8.2 billion, given to 583 crypto companies, in 2024.

Company closure / exchange delisting:

Some companies may be shut down for failing to comply with regulations, resulting in the loss of revenue and significant damage to their reputation. In other cases, blockchains could be delisted from major exchanges, which would further disrupt liquidity, reduce market access, and erode investor confidence.

Case Study: Japanese cryptocurrency exchange DMM Bitcoin will cease operations by March 2025 following a hack in May 2024 that resulted in the theft of 4,502.9 BTC, worth around $305 million. Despite efforts to recover and restore the platform’s viability, including securing a 5 billion yen loan and planning to raise additional funds, the company has decided to shut down.

As part of the shutdown, DMM Bitcoin will transfer all its assets, including customer accounts, to SBI VC Trade, a subsidiary of the SBI Group, with the transaction expected to conclude by Q1 2025. SBI VC Trade will also expand its offerings to include 14 crypto spot trading options currently available on DMM Bitcoin.

The hack, attributed to the Lazarus Group, marks Japan’s second-largest digital asset breach after Coincheck’s 2018 hack. Despite efforts to track and recover the stolen funds, including over $35 million laundered through an online marketplace, all attempts have been unsuccessful.

Meanwhile, on 25th December 2024, Binance officially delisted three tokens: WazirX (WRX), Akropolis (AKRO), and Bluzelle (BLZ), after they failed to meet the platform's standards for development, network stability, trading volume, and regulatory compliance.

The delisting caused a sharp decline in WRX's price, which has fallen by over 58%, from $0.2494 to $0.09918, reflecting the ongoing struggles of WazirX, especially after a major hack in July 2024 that lost over $230 million. Meanwhile, Akropolis and Bluzelle also did not meet Binance’s criteria, underscoring the volatile nature of the crypto industry.

Reputational damage and client attrition:

Clients and partners lose trust in your ability to safeguard their assets. Our own research demonstrates that reputation is no longer an image, but an actionable asset, especially where public trust is vital for the success of a company in a fast-moving market. As well as suffering fines from regulatory companies that are given publicly, the companies also suffer severe reputational damage and significant market share. Once trust is eroded, retaining customers becomes an uphill battle.

Case study: In July 2024, global exchange BitMEX pleaded guilty to a violation of the US Bank Secrecy Act (BSA), failing to operate without meaningful AML protocols or Know Your Customer requirements. In order to use the platform, customers were only required to provide an email address, meaning the exchange became very attractive to malicious actors who sought after companies allowing anonymity. According to the FBI, BitMEX intentionally failed to comply with regulations in order to boost revenue, highlighting the company’s disregard for the integrity of the US markets and a lack of care for the security of well-meaning customers. Ultimately this guilty plea led to financial penalties, prison charges and personal penalties for the exchange’s founders, and critically, an irreversible loss of public trust and reputation damage. Despite attempts to implement rigorous compliance frameworks and collaboration with authorities, their past failures to comply with regulations has failed to adequately address the lack of trust with their former clients.

Jail time:

Some CEOs and company representatives can face prison sentences for failing to comply with regulatory authorities. While this may seem extreme, it serves as a deterrent to other industry leaders and company executives, discouraging them from neglecting compliance regulations and allowing activities like money laundering and terrorism financing to occur on their platforms or exchanges.

Case study: Changpeng Zhao, the founder of Binance, was released from a correctional facility in California on September 27 after serving part of his sentence. Earlier this year, Zhao was sentenced to four months in prison for violating U.S. money laundering laws related to Binance, the world's largest cryptocurrency exchange. Zhao pleaded guilty to charges, with prosecutors accusing Binance of facilitating illegal activities such as allowing transactions linked to terrorist organizations like Hamas, al-Qaeda, and ISIS, failing to report over 100,000 suspicious transactions. Binance also faced allegations of enabling the sale of child sexual abuse materials and receiving ransomware proceeds. As part of a settlement, Binance agreed to pay a $4.32 billion fine, and Zhao personally paid $50 million in criminal fines and another $50 million to the U.S. Commodity Futures Trading Commission.

In the crypto world, reputation is everything. A tarnished reputation can take years to rebuild—if it can be rebuilt at all.

Turning Risk into Opportunity

So, how can your business avoid these pitfalls and position itself as a trusted player in the crypto space? The answer lies in proactive compliance and threat intelligence.

At Nominis, we understand the challenges crypto companies face in navigating the complex and ever-changing regulatory landscape. That’s why we offer a fairly priced, innovative, and attentive compliance solution designed to safeguard your operations and reputation.

What Makes Nominis Different?

24/7 Risk Assessment We continuously monitor and assess the risk levels of transactions and wallets involved in your business. Our advanced threat intelligence systems ensure that potential vulnerabilities are identified and mitigated before they become liabilities.
Tailored Solutions Every crypto business is unique. Nominis provides customized compliance strategies that align with your company’s specific needs, ensuring you stay ahead of regulations and threats.
Reputation Protection With Nominis by your side, you’re not just meeting compliance standards—you’re exceeding them. This proactive approach reassures your clients and partners that their trust is well-placed.
A one-stop-shop Unlike other platforms that offer a limited range of services like auditing or reactive checks, Nominis provides a holistic approach to crypto compliance. We draw from multiple sources and tackle every aspect of compliance, offering immediate, comprehensive solutions to protect your business.
An AI Crypto Compliance Officer Our platform acts as a powerful extension of your compliance team. Using AI-driven technology, we offer real-time monitoring and rapid risk assessments of wallets interacting with your business. We scan an extensive range of sources and deliver the fastest risk evaluations in the industry, making compliance more efficient and less burdensome.

Invest in Compliance and Reap the Rewards

As you finalize your budgets for the year ahead, consider the long-term value of a robust compliance program. Investing in compliance isn’t just about avoiding fines; it’s about securing your company’s future. By partnering with Nominis, you gain:

Protection against regulatory penalties.
A stronger defense against cyber threats.
Enhanced trust and credibility in the marketplace.

In the fast-paced world of crypto, staying compliant isn’t just smart—it’s essential. Don’t let non-compliance jeopardize everything you’ve built.

Partnering with Nominis allows you to turn compliance into your competitive advantage.