What is a AML?
Quick Definition
AML (Anti-Money Laundering) refers to the laws, regulations, and procedures designed to prevent the use of financial systems for laundering the proceeds of crime.
Full Definition
AML is a broad regulatory framework that governs how financial institutions detect, prevent, and report activity associated with money laundering, terrorist financing, and other financial crimes. Common AML practices include customer due diligence (verifying who customers are and what they do), transaction monitoring (looking for patterns associated with illicit activity), suspicious activity reporting (flagging concerning transactions to regulators), and sanctions screening (ensuring customers and transactions don't involve sanctioned parties). Together these controls help financial institutions identify and manage financial crime risks.
AML requirements apply to regulated financial institutions around the world, including banks, custodians, exchanges, and stablecoin issuers. As digital assets have become more integrated with the financial system, regulated crypto businesses have become subject to many of the same AML obligations as traditional financial institutions.
AML regulations have evolved significantly over the past several decades, becoming increasingly detailed, internationally coordinated, and rigorously enforced. In the European Union, the Anti-Money Laundering Directives set the framework; in the US, the Bank Secrecy Act and related regulations apply; many other jurisdictions have their own equivalents. Crypto businesses operating in regulated markets are subject to these requirements just like traditional financial institutions.
Why AML matters for stablecoins
AML compliance is an important requirement for stablecoins operating in regulated markets. It helps issuers meet legal obligations, maintain relationships with banking and custody partners, and support participation from institutional investors. Public blockchains also provide a high degree of transparency, allowing specialized tools to analyze transaction activity, identify high-risk addresses, and support AML monitoring.
AML and Steady
Steady's compliance framework includes AML controls such as KYC procedures, transaction monitoring, and sanctions screening. These controls support our regulatory obligations and help maintain relationships with regulated banking and custody partners. AML processes form part of the broader compliance framework that supports the operation of STDY.
Related Terms
Identity Layer
ReadAn identity layer is the system used to verify and manage the identities of users interacting with a protocol or financial service.
KYC
ReadKYC (Know Your Customer) is the process by which financial institutions verify the identity of their customers as part of regulatory compliance.
MiCA
ReadMiCA (Markets in Crypto-Assets Regulation) is the European Union's comprehensive regulatory framework for crypto-assets, designed to provide legal clarity, consumer protection, and market integrity across EU member states.
MiFID II
ReadMiFID II (Markets in Financial Instruments Directive II) is the European Union's comprehensive framework regulating financial instruments and the firms that deal in them, providing strong investor protection and market integrity standards.
Redemption Infrastructure
ReadRedemption infrastructure refers to the systems, processes, and partners that enable holders to exchange their tokens for the underlying value.
Risk Monitoring
ReadRisk monitoring is the continuous process of identifying, measuring, and responding to risks that could affect a protocol, its assets, or its users.
Other Glossary Items
Learn about common and essential terms related to Steady and other stablecoin protocols.
Algorithmic Stablecoin
ReadAn algorithmic stablecoin attempts to maintain its value through automated rules that adjust token supply based on market demand, rather than holding equivalent reserve assets.
APY
ReadAPY, or Annual Percentage Yield, is the standardized rate of return an asset generates over a year, including the effect of compounding.
Arbitrum
ReadArbitrum is a Layer 2 blockchain network built on top of Ethereum, designed to offer faster and cheaper transactions while inheriting Ethereum's security and infrastructure.
Asset Backing
ReadAsset backing refers to the real-world or on-chain assets held by the issuer to support the value of every token in circulation.
Asset Locking
ReadAsset locking refers to restricting access to funds for a defined period or condition, during which they cannot be transferred or used.
Asset Segregation
ReadAsset segregation is the practice of keeping client or backing assets separate from the issuer's operational funds, protecting them from the issuer's other obligations.
Audit
ReadAn audit is an independent examination of a protocol's code, reserves, or operations by qualified third parties to verify accuracy and compliance with stated claims.
Backing
ReadBacking refers to the assets or mechanisms that support a stablecoin's value and help it maintain its intended reference value.
Blockchain Network
ReadA blockchain network is the system of connected participants and infrastructure that validates, records, and maintains data on a specific blockchain.
Blockchain
ReadA blockchain is a distributed digital ledger that records transactions across a network of computers in a secure, transparent, and tamper-resistant way.
Bridge
ReadA bridge is a mechanism that enables the transfer of assets or data between different blockchain networks.
Clarity Act
ReadThe Clarity Act is a proposed US legislative framework intended to clarify the regulatory treatment of digital assets, defining when they should be treated as securities versus commodities.
Collateralization / Over-collateralization
ReadCollateralization refers to the ratio between the value of assets held in reserve and the value of tokens issued. Over-collateralization means holding more in reserves than the value of tokens issued.
Composability
ReadComposability refers to the ability of different protocols, contracts, and tokens on a blockchain to interact and combine with each other seamlessly.
Counterparty Exposure
ReadCounterparty exposure refers to the risk that another party, such as a bank, custodian, broker, or service provider fails to fulfill its obligations, potentially affecting the assets or funds it holds.
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