Compliance for AI and Crypto: A security first approach
As AI and cryptocurrency continue to reshape industries, compliance remains a critical concern. Taking place on the first day of AIBC Eurasia, the panel Compliance for AI and Crypto: Security First brings together top legal experts – Cal Evans – Managing Associate at Gresham International, Miroslav Duric – Solicitor & Attorney at Law with Taylor Wessing, Dr. Joseph Borg – Partner at WH Partners, and Joseph Collement – CLO, Bitcoin.com, to discuss regulatory challenges, security priorities, and the evolving landscape of compliance in these rapidly advancing sectors.
The AIBC Eurasia conference and summit is being held from the 23rd to 25th of February at the Festival Arena in Dubai.
Challenges in Crypto Regulation
The discussion started out by highlighting the UK Financial Conduct Authority (FCA) Regulations. The introduction of financial promotions regulations presents significant challenges for crypto businesses. Compliance requires specific language and disclaimers, increasing operational costs and complexity.
“As a business in crypto the most challenging thing is to comply with the new UK FCA regulations. They’re figuring out crypto as they go along. It’s a challenge for them to understand that if you’re just a website or blog talking about crypto you shouldn’t have to comply. There are a lot of companies caught in the middle of that,” says Joseph Collement.
“It really is a sledgehammer to crack a nut,” concludes Cal Evans.
Cross-jurisdictional complexities
Panellists also highlighted the issue of jurisdictional complexity. Markets in crypto assets regulation (MiCA) was initially welcomed for providing a unified regulatory framework, but additional regulations from the European Securities and Markets Authority (ESMA) are making compliance increasingly difficult, potentially favouring large operators over startups. Different regulatory frameworks in the UK (FCA), EU (MiCA), and other regions create hurdles for companies operating internationally. Businesses often need separate compliance strategies for different jurisdictions.
“We are noticing problems with clients operating in more than one jurisdiction”, chimes in Miroslav Duric. “ We see from the latest discussion papers of the FCA in the UK that If you offer crypto assets on a cross border basis, you won’t be able to use the same or a similar white paper prepared in the EU.
“This is really, really problematic, especially for smaller firms where you need to have a team of dedicated lawyers covering different jurisdictions, even for more established businesses, ” he concludes.
Miroslav agrees. “It makes no sense, even the US doesn’t understand the regulations.”
Standing at a crossroads
“ When MiCA came out, everyone looked at it positively as the first pan-national regulatory framework, a law that allows you to passport your services, explains Joseph Borg. He goes to voice his concern about the increasing challenges, explaining that when the RTS’ came along it became tougher and tougher and now, he believes, ESMA is issuing guidelines making it even more difficult.
“We are at the crossroads. Do we want this industry or don’t we? We’re getting the feeling that the ESMA seems to be trying to really impact the industry, to shrink it. In every industry It’s good to have competition, it’s good to have choice. Unfortunately, we have a situation where, if the rules remain so tough, within the next four or five years we’re going to have a dozen operators that will take over the market and there will be no space for smaller operators to compete with them.”
Navigating regulatory uncertainty
Joseph Collement highlighted that businesses opting for self-custody (where users hold their own keys) can avoid many regulatory burdens associated with custodial services.
Choosing the Right Headquarters is important. Jurisdictions like Dubai and Switzerland offer regulatory clarity, talent pools, and investor access, making them attractive options for crypto startups. Avoiding misleading marketing materials and ensuring compliance with regulatory requirements can also help businesses stay out of regulatory scrutiny.
Strategies for Crypto businesses to reduce exposure
Start small & expand: Companies should focus on securing licenses in one jurisdiction before scaling to others.
Jurisdiction-specific approach: Businesses should consider their target market when selecting a regulatory base rather than opting for lenient offshore jurisdictions.
Avoid unnecessary attention: Excessive marketing, aggressive promotions, and non-compliant practices increase regulatory scrutiny.
The discussion underscored the evolving nature of crypto regulations, with global inconsistencies posing challenges for businesses. The panelists emphasised that while regulation can bring legitimacy to the industry, overly restrictive frameworks may hinder innovation and competition. Companies must navigate these complexities strategically to ensure compliance while maintaining operational efficiency.
