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Crypto firm DAG Global to resubmit banking license application

DAG Global, a London-based crypto start-up, is resubmitting its application for a banking license, aiming to become the UK’s first bank for cryptocurrency businesses.

The FT reported that DAG Global’s bid, which will be resubmitted next month, will be a test for regulators’ openness to digital assets, based concerns over links to financial crime.

Sean Kiernan, CEO at DAG Global, told the newspaper that it aims to provide bank accounts for crypto businesses from 2021. He said: “It’s a lack of understanding and reputation risk that has kept others away — we think it can be a cleaner sector [than mainstream finance].”

Kiernan continued that since the bank submitted a first application last May it had had several rounds of “constructive dialogue” with UK regulators, the Prudential Regulation Authority and Financial Conduct Authority.

“Thus far, the regulators have not raised any red flags,” he said.

According to Rachel Wooley, Global AML Manager at Fenergo, reputational issues are a problem in the crypto space, however, technology can support understanding of entity ownership structures.

“Kiernan is right – there is a reputation problem amongst cryptocurrency providers. In some respects, that reputation is warranted with a lack of transparency around who is issuing crypto, who is buying and selling, and their sources of funding.”

Fenergo’s recent poll of 400 industry practitioners found that only 8 per cent of respondents considered existing KYC/AML checks in cryptocurrency markets to be effective, with 40 per cent describing them as ineffective, but the 5th AML Directive, this will change.

As the cryptocurrency market is exploding, regulators globally are stepping up their approach by introducing legislative requirements and AML obligations, Wooley said.

“To appease regulators, challenger banks looking to service crypto businesses can implement effective AML controls and systems so that they can apply the same risk-based approach to onboarding a crypto entity as a mainstream bank would to a more traditional customer.

“Technology that can enable challenger banks to identify and understand complex entity ownership structures and associations with potential politically exposed persons (PEPs) and other high-risk individuals will instil confidence in the regulators that the risk that comes with cryptocurrencies is being dealt with effectively. This will streamline the process of obtaining banking licenses and open up the market for opportunities.”

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