Crypto Firms Have a Compliance Infrastructure Problem

By Vinit Shah Former General Manager, VARA

By Bhavin Shah Founder and CEO, Sherlocq

Crypto Firms Have a Compliance Infrastructure Problem

Digital asset businesses are scaling faster than their compliance functions, and the gap is where the real risk sits.

The Reality on the Ground

A crypto firm onboards users across four jurisdictions, the UAE, the UK, the EU, and Singapore, within its first two years of operation. The product, the headcount and the revenue all scale together. The one thing that almost never keeps up is the compliance function holding it all up underneath.

It is not for lack of intention. The founders know they need to be compliant. The legal counsel knows the frameworks exist. But knowing that rules exist and operationalising a live, multi-jurisdictional regulatory research function are two entirely different things. The gap between the two is where firms get into serious trouble.

How Compliance Actually Works in Crypto (Or Doesn’t)

In theory, a crypto firm’s compliance workflow is straightforward: monitor regulatory developments in each operating jurisdiction, map new obligations to internal processes, update policies, train teams, and document everything for audit readiness. It is a tidy list on paper, and a grind to run in practice.

In practice, most firms are working from a patchwork of approaches: a general counsel tracking email newsletters from regulators, a compliance officer manually checking the FCA’s (Financial Conduct Authority) website, a consultant hired specifically for VARA (Virtual Assets Regulatory Authority) registration in the UAE who drops off once the licence is granted. Regulatory research is fragmented, reactive, and almost always under-resourced relative to the actual volume of change happening across these markets simultaneously.

The UAE’s VARA (Virtual Assets Regulatory Authority) framework evolves on a different cycle than MiCA (Markets in Crypto-Assets). Singapore’s MAS (Monetary Authority of Singapore) licensing obligations read nothing like the FCA’s Travel Rule guidance. Trying to hold all four in your head at once, without a proper system to lean on, is less a strategy than a liability that has not surfaced yet.

What Happens When It Falls Apart

The consequences of compliance infrastructure gaps in digital asset businesses are not theoretical. A missed update to AML obligations under MiCA can trigger supervisory action from a European NCA. Operating under an outdated understanding of the UK’s crypto promotion rules, which tightened significantly in 2023, can result in FCA enforcement and reputational damage that is hard to undo. In Singapore, falling behind on MAS expectations for Digital Payment Token service providers has cost firms their licences.

The financial penalties are one dimension. The operational fallout is another: remediation programmes, enhanced supervision, leadership accountability, and the not-insignificant cost of emergency legal counsel brought in to contain a situation that should never have reached that point. Most of these failures trace back to the same root cause: no one had a reliable, structured way to know what they did not know.

What These Firms Actually Need

What crypto and digital asset firms operating across the globe need is not more PDFs from regulators. They need a way to find out quickly what has changed, understand how it applies to their specific business model, and act on it before it becomes a problem.

That means jurisdiction-specific regulatory intelligence mapped to their licence type, product offering, and client base. It means being able to see consultations, proposed rule changes, and enforcement patterns, not just the final published guidance. And it means all of this presented in a format that a compliance team can work with, not a hundred-page policy document that takes three weeks to parse.

Where Manual Work Ends

This is precisely the problem Sherlocq is built to solve. Rather than leaving compliance teams to manually track regulatory developments across global jurisdictions, each with its own cadence, language, and enforcement culture, Sherlocq lets them ask a direct question and get a sourced, structured answer drawn from regulatory content across all jurisdictions, instead of trawling regulators’ websites to piece the picture together by hand.

Think of it as the difference between searching for needles yourself and having a system that tells you exactly which haystack to look in, how many needles there are, and which ones are sharp. For a crypto firm with VASP (Virtual Asset Service Provider) registration in the UAE, an FCA-registered cryptoasset business status in the UK, MiCA obligations across the EU, and a Major Payment Institution licence in Singapore, that is not a metaphor. That is the actual daily reality of their compliance exposure.

Sherlocq maps the regulatory corpus across jurisdictional developments. Its coverage includes consultation papers before they harden into binding rules, as well as the enforcement actions that signal where a supervisor’s attention is turning. The point is to let a compliance team check its full position in minutes rather than days, and move from reactive firefighting toward the kind of structured oversight regulators expect and boards should be demanding.

The process becomes cleaner: when a question comes up, a new rule, a licence condition, whether a policy still holds, the team can put it to Sherlocq and get back an answer with the relevant obligations mapped and the sources attached, rather than starting from a blank page. They act from knowledge rather than guesswork, and every answer is traceable back to its source. The research function that was missing starts to behave like one.

Crypto can be a jackpot, but not when the payout window gets closed by a regulator because no one was watching the rules. The firms that last are not necessarily the ones with the best technology or the biggest market. They are the ones that built compliance into the foundation early enough that it never became the thing that brought everything else down.

In your own organisation, is regulatory information something that is monitored, or something that is actually used to change decisions?

See how compliance and legal teams use Sherlocq to map an issue to the relevant rules and enforcement precedent across jurisdictions in minutes. Book a private demo at sherlocq.com

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