Making Sense of What AML Looks Like Across the Crypto Landscape

Traditional compliance methods face a tough battle in the cryptocurrency world. Pseudonymity, code-driven transactions and borderless systems, it turns out, don’t naturally mesh with laws designed for a world of centralized banks and paper trails.

But as crypto firms increasingly go public, with exchange and wallet provider Blockchain.com, as well as newly formed digital assets company Evernorth Holdings being the two most recent per Monday (Oct. 20) news, compliance is becoming a priority, particularly around anti-money-laundering (AML) and financial crime (Fin Crime) frameworks.

After all, for crypto to be legitimized, its risk controls must be legitimate. Underscoring this reality, French regulators on Friday (Oct. 17) reportedly initiated a review of the world’s largest cryptocurrency exchange, Binance, with its MiCA EU licensing potentially hanging in the balance for certain services.

In the U.S., crypto firms are navigating integrations with Office of Foreign Assets and Financial Crimes Enforcement Network (FinCEN) frameworks, ensuring that digital asset activities align with AML, know your customer (KYC) and sanctions compliance protocols.

With crypto’s institutional footprint only growing, a broader conversation is emerging: what should compliance look like in a world where financial systems are code-driven, decentralized and global by default?

Read more: Crypto Is Coming for the Cubicle; Are Finance Teams Ready?

AI, APIs and the End of Manual Compliance

The most promising shift that may power compliance modernization is data, which is being produced in massive, continuous and interoperable formats, particularly around payments and financial transactions. Legacy AML frameworks, born in the 20th century, assumed that risk could be contained within discrete institutions and analyzed in batches. Innovations like blockchain break that assumption. Value now moves across hundreds of platforms, each generating open yet pseudonymous data. To make sense of it, compliance systems may increasingly need automation, interoperability and intelligence.

Industry responses to a request for comment (RFC) by the U.S. Treasury on how to address cryptocurrency’s risks for regulated financial institutions, particularly under the new GENIUS Act, could provide a hint at what a compliance-first crypto landscape might look like.

Many crypto firms, including large and public ones such as Coinbase, are advocating for an AML architecture built on blockchain analytics, artificial intelligence (AI), APIs and decentralized identity. Rather than simply requiring reporting of individual transactions, crypto industry stakeholders have argued in their written responses for analytics that identify suspicious patterns across chains, wallets and exchanges in real time. This reflects a shift toward a “network intelligence” model of AML.

At the same time, firms allege that traditional KYC regimes require repetitive identity checks and data storage. Coinbase, for example, suggested that DIDs and zero-knowledge proofs (ZKPs) could validate identities securely, reduce duplication and minimize privacy exposure — all while preserving compliance integrity

AI plays a central role here. Modern compliance platforms deploy machine learning to map behavioral patterns, detect unusual fund movements and predict emerging risks across chains. APIs link these insights to exchanges, custodians and regulators, creating networks of shared intelligence. Compliance ceases to be a silo — it becomes an ecosystem.

A PYMNTS Intelligence report, “From Experiment to Imperative: U.S. Product Leaders Bet on Gen AI,” captures this pivot toward AI well, finding that 85% of product leaders surveyed forecasted better regulatory compliance thanks to AI.

Still, these regulatory overtures may be underpinned by strategic considerations. First, as one of the largest regulated crypto exchanges in the U.S., Coinbase itself has invested heavily in monitoring, compliance infrastructure and legal advocacy. By pushing for higher technical standards and recognizing advanced tools, it creates a competitive moat: smaller entrants may struggle to invest at scale.

Read more: Treasury Guidance Charts Compliance Course for CFOs in Crypto

Identity as the New Compliance Layer

Perhaps the most radical innovation is unfolding around digital identity. Compliance has always depended on knowing who’s on the other side of a transaction. But in the blockchain world, identity can no longer mean exposure. Instead, cryptographic tools like zero-knowledge proofs and decentralized identifiers allow participants to prove eligibility or legitimacy without revealing personal data.

As compliance technologies proliferate, the next frontier is interoperability. Just as blockchains are working toward seamless cross-chain communication, compliance systems must learn to talk to one another. Whether through FATF’s Travel Rule, global data-sharing APIs or privacy-preserving attestations, the goal is to make compliance portable across jurisdictions and platforms.

The convergence of blockchain, AI and digital identity is pointing toward a future of “self-enforcing” compliance: systems that automatically verify legitimacy and reject illegitimate actions at the protocol level.

And while regulators typically move slower than innovators, the incentives around effecting appropriate AML and fin crime controls are only growing. As PYMNTS covered earlier, a report from the Financial Action Task Force (FATF) found that “most on-chain illicit activity now involves stablecoins.”