Cryptocurrency exchanges that wish to better themselves and improve their technology are seeking partnership with Nasdaq. Nasdaq is already in possession of an advanced proprietary surveillance technology that scans transactions and seeks out fraudulent patterns.
To collaborate with any crypto exchange, Nasdaq has first prepared a test that the exchanges need to pass, with their ability to cover the costs being a secondary issue. Only seven cryptocurrency exchanges were able to pass the test as of yet, with only two of them — SBI Virtual Currency and Gemini — were publicized. Others seek out this technology to attract new clients, such as institutional and high-profile investors.
Tony Sio, the head of exchange and regulator surveillance team at Nasdaq, provided better insight into questions that the exchanges have to answer to pass the test. Sio also pointed out that this is a new practice at Nasdaq, as their usual clients were always well-known. However, the inclusion of lesser-known entities requires a stricter vetting process.
Sio revealed that the test Nasdaq has prepared revolves around providing satisfying answers to questions regarding the exchanges’ business practices, more specifically — KYC/AML, Business Model, and Exchange Governance & Controls.
Nasdaq has prepared a document titled “Key Questions to Ask When Evaluating a Cryptocurrency Exchange,” and the document’s first section is called Business Model. Here, the exchange undergoing the test needs to answer several questions regarding their methods, the origins of crypto assets and their use in the past, and alike. The second section concerns KYC/AML, and it has its series of question, with the most important ones discussing the background of the exchanges’ founders and their expertise.
The last section concerns the Exchange Governance & Controls, which explores issues such as whether there are standards regarding the new crypto asset listings, and how transparent they are.