Glossary - V20

A

AML (Anti-Money Laundering)

A set of procedures, laws, and regulations designed to prevent criminals from disguising illegally obtained funds as legitimate income. VASPs must implement AML programs to detect and report suspicious activities.

API (Application Programming Interface)

A set of protocols and tools that allow different software applications to communicate with each other. Exchanges and VASPs often provide APIs for trading and data access.

Altcoin

Any cryptocurrency other than Bitcoin. Examples include Ethereum, Ripple, Litecoin, and thousands of others.

B

Blockchain

A distributed ledger technology that records transactions across multiple computers in a way that makes them difficult to alter retroactively. The foundation of most cryptocurrencies.

Bitcoin (BTC)

The first and most well-known cryptocurrency, created in 2009 by an anonymous person or group using the pseudonym Satoshi Nakamoto.

BSA (Bank Secrecy Act)

U.S. legislation that requires financial institutions to assist government agencies in detecting and preventing money laundering.

C

Cold Storage

The practice of keeping cryptocurrency private keys completely offline, typically for security purposes. Common methods include hardware wallets and paper wallets.

Compliance

The act of adhering to laws, regulations, and industry standards. VASPs must maintain compliance with various financial and data protection regulations.

Cryptocurrency Exchange

A digital marketplace where users can buy, sell, and trade cryptocurrencies. Exchanges can be centralized (CEX) or decentralized (DEX).

Custodian

An entity that holds and safeguards financial assets on behalf of clients. Crypto custodians secure digital assets using various security measures.

CTF (Counter-Terrorist Financing)

Measures designed to detect and prevent the financing of terrorist activities. Often implemented alongside AML programs.

D

DApp (Decentralized Application)

An application that runs on a blockchain network rather than being hosted on centralized servers. Common in the DeFi ecosystem.

DeFi (Decentralized Finance)

Financial services built on blockchain technology that operate without traditional intermediaries like banks or brokers.

Digital Asset

A broad term for any asset that exists in digital form, including cryptocurrencies, tokens, NFTs, and other blockchain-based assets.

E

Ethereum (ETH)

A decentralized blockchain platform that enables smart contracts and decentralized applications. The second-largest cryptocurrency by market capitalization.

Exchange

See "Cryptocurrency Exchange"

F

FATF (Financial Action Task Force)

An intergovernmental organization that sets international standards for combating money laundering and terrorist financing, including the "Travel Rule" for VASPs.

Fiat Currency

Government-issued currency that is not backed by a physical commodity. Examples include USD, EUR, GBP, and JPY.

FinCEN (Financial Crimes Enforcement Network)

A bureau of the U.S. Department of Treasury that collects and analyzes information about financial transactions to combat money laundering and financial crimes.

K

KYC (Know Your Customer)

The process of verifying the identity of clients to prevent fraud, money laundering, and terrorist financing. A fundamental requirement for regulated VASPs.

KYT (Know Your Transaction)

The practice of monitoring and analyzing cryptocurrency transactions to identify suspicious activities and ensure compliance.

L

Liquidity

The ease with which an asset can be bought or sold without significantly affecting its price. High liquidity is desirable for trading.

Liquidity Provider

An entity or individual that supplies assets to a market or trading pair, enabling others to trade those assets.

M

Market Maker

A firm or individual that provides liquidity to a market by placing both buy and sell orders, profiting from the bid-ask spread.

MiCA (Markets in Crypto-Assets)

European Union regulation providing a comprehensive regulatory framework for crypto-assets and service providers.

Multi-Signature Wallet

A cryptocurrency wallet that requires multiple private keys to authorize a transaction, enhancing security.

N

NFT (Non-Fungible Token)

A unique digital asset that represents ownership of a specific item or piece of content, typically on a blockchain.

Node

A computer connected to a blockchain network that maintains a copy of the ledger and validates transactions.

P

Private Key

A secret cryptographic code that allows a user to access and control their cryptocurrency. Must be kept secure and never shared.

Public Key

A cryptographic code that allows others to send cryptocurrency to a user. Can be safely shared publicly.

R

Regulatory Compliance

The process of ensuring operations adhere to relevant laws, regulations, and guidelines set by governing bodies.

Risk Assessment

The process of identifying, analyzing, and evaluating potential risks associated with virtual asset transactions and operations.

S

Smart Contract

Self-executing contracts with terms directly written into code. They automatically execute when predetermined conditions are met.

Stablecoin

A cryptocurrency designed to maintain a stable value, typically by being pegged to a fiat currency like USD. Examples include USDT, USDC, and DAI.

SAR (Suspicious Activity Report)

A document that financial institutions must file with authorities when they detect potentially suspicious or illegal activities.

T

Token

A digital asset created on an existing blockchain. Can represent various things including utility, security, or governance rights.

Travel Rule

FATF recommendation requiring VASPs to share sender and recipient information for virtual asset transfers above a certain threshold.

Transaction Monitoring

The continuous surveillance of transactions to identify suspicious patterns or activities that may indicate money laundering or fraud.

V

Virtual Asset

A digital representation of value that can be digitally traded or transferred and used for payment or investment purposes.

VASP (Virtual Asset Service Provider)

Any entity that conducts one or more activities or operations for or on behalf of another person involving virtual assets. Includes exchanges, wallets, custodians, and more.

W

Wallet

A digital tool (software or hardware) that stores private keys and allows users to send, receive, and manage cryptocurrencies.

Whitelist

A list of approved addresses or entities that are permitted to transact with a particular service or account.