When it comes to cross-border transactions, cryptocurrency is often considered one of the quickest and easiest ways to complete a transaction. However, navigating the different jurisdictional legislation and regulations that apply to crypto transactions isn’t just challenging but often requires a significant investment of time and resources.
The rise of cross-border cryptocurrency transactions
Although crypto has had a rather coloured history since its first introduction to the public in early 2009, there’s no denying that the use of this digital currency is becoming increasingly prevalent, especially when it comes to international transactions. In fact, JP Morgan estimates that international transfers will increase 5% each year until 2027.
Cross-border transactions often pose a number of challenges to individuals and businesses looking to complete payments in other countries. From currency conversions and banking fees to delayed settlements, cross-border transactions have been a time-consuming process in the past. However, cryptocurrencies aren’t bound by the same constraints as traditional banking systems and financial institutions, making them a popular choice for international payments.
Unlike traditional payment methods, cryptocurrencies are inherently global, allowing users to send and receive money anywhere in the world without worrying about currency conversions or geographical restrictions. And thanks to the decentralised nature of the blockchain networks that cryptocurrencies operate on, they’re not subject to the same controls or delays caused by central authorities like banks or governments. This means that crypto transactions are often completed within minutes or hours, regardless of the origin or destination.
Lower transaction costs are also behind the rise of cross-border crypto transactions. Traditional cross-border payments often involve intermediaries such as banks and payment processors, each charging a fee. Cryptocurrencies typically bypass intermediaries, reducing costs significantly, especially for small or frequent transactions.
While cryptocurrencies offer these advantages, these forms of digital currencies continue to be plagued by regulatory uncertainty.
Why compliance is critical in global crypto operations
Compliance is a key aspect of global crypto operations. Not only does compliance ensure adherence to the laws and regulations that govern crypto transactions, but it’s also central to maintaining trust, protecting users and sustaining the enduring growth of the industry as a whole. That said, one of the biggest challenges crypto platforms face when it comes to cross-border transactions is staying compliant with the varying regulatory requirements across different jurisdictions.
Due to the pseudonymous nature of crypto, these digital currencies are often misused for illegal activities like money laundering, terrorist financing and tax evasion. Compliance with Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT) regulations helps prevent these activities and protect the integrity of the financial system. Each country will often have its own rules and regulations relating to Know Your Customer (KYC) protocols and crypto taxation. It’s on global crypto operations to comply with local laws to avoid penalties, sanctions or being banned from operating in certain jurisdictions.
Regulations often aim to protect users from fraud, scams and unfair practices. Ensuring compliance helps create a safer environment for users, enhancing the adoption and legitimacy of cryptocurrencies. When you create a safe space for your users, you’re able to establish credibility and build trust among a range of important stakeholders, including users, investors and regulators.
Key regulatory differences across major regions
Cryptocurrency regulations vary widely across the globe, reflecting different attitudes, legal frameworks and levels of market maturity.
United States
In the US, crypto is governed by multiple agencies, which has led to a complex and fragmented regulatory environment. For example, the Securities and Exchange Commission (SEC) views many cryptocurrencies as securities, which translates to strict regulations and tight controls. The Internal Revenue Service (IRS) treats crypto as a form of property for tax purposes, meaning individuals and businesses are required to report their gains and losses.
In addition to the regulations enforced by federal agencies in the US, there are a number of state-level regulations that crypto platforms must adhere to. Despite the different regulations at play, there’s still a heavy focus on investor protection and AML/CFT compliance.
European Union
The EU’s member states have been working toward a more harmonised approach to crypto regulations. Introduced in December 2024, the Markets in Crypto-Assets (MiCA) Regulation was introduced, creating a unified framework for crypto regulation across all member states, covering tokens, stablecoins and exchanges.
In addition, recent changes to the EU’s Anti-Money Laundering Directive (6AMLD) mean that crypto companies must comply with stringent KYC and AML requirements.
Asia
Asia also presents a diverse regulatory landscape, with some countries embracing crypto while others impose strict restrictions. In China, crypto trading and mining are banned, but the government promotes its Central Bank Digital Currency (CBDC), the digital yuan.
Conversely, Japan was one of the first countries in the region to regulate crypto, treating it as legal property under the Payment Services Act. Exchanges must register with the Financial Services Agency (FSA). Similarly, Singapore has taken a pro-crypto stance with clear licensing requirements under its own Payment Services Act.
Latin America
Latin America is an emerging hub for crypto adoption, driven by economic instability and high remittance needs. As such, countries in the region continue to evolve regulatory frameworks with increasing government oversight.
El Salvador was the first country in the region to adopt Bitcoin as legal tender, with the government incentivising crypto use. While Bitcoin isn’t considered legal tender in Brazil, the country passed a comprehensive crypto framework in 2022, legalising crypto as a legitimate payment method. As such, crypto businesses are required to register their platform with regulators.
Australia
Compared to other jurisdictions around the world, Australia has a well-established regulatory framework for cryptocurrencies. Crypto exchanges are free to operate so long as they register with the Australian Transaction Reports and Analysis Centre (AUSTRAC) and comply with the country's AML/CFT regulations.
Challenges in meeting cross-border KYC/AML requirements
Based on our quick regulatory round-up, it’s clear that the disparities in KYC and AML requirements pose a key challenge for crypto businesses operating across borders. That said, maintaining compliance with the relevant KYC/AML requirements is central to success.
Different countries have their own unique KYC/AML requirements, which often encompass varying thresholds for due diligence and data collection. There are cases where some jurisdictions prioritise privacy laws (EG. GDPR in Europe), which can actually conflict with data-sharing requirements for AML compliance.
There are also challenges when it comes to verifying the identity of users from different countries due to diverse ID systems and a lack of standardisation. These verification challenges are further compounded by language barriers.
While navigating cross-border frameworks and requirements is incredibly complex, it’s not worth risking non-compliance. Crypto companies found to be in breach of local or international AML laws can result in fines, sanctions or loss of operating licenses. Not to mention, failure to meet global standards can diminish trust among customers and partners, impacting the success and longevity of your crypto operations.
How Data Zoo’s global data access simplifies cross-border operations
With the right KYC solution on your side, you’ll be able to ensure compliance with cross-border requirements and legislation. With a direct connection to authoritative data sources across 170 countries, Data Zoo’s identity verification solution allows you to onboard global customers in seconds. Not to mention, our platform adheres to the highest industry standards and regulations, ensuring your business meets these demands with confidence.
Book a free demo to learn more about how Data Zoo can help your crypto platform navigate global regulations.