# What Are the Ongoing Compliance Costs Associated with Operating a Chartered Crypto Bank? ▴ Question

**Published:** 2025-08-10
**Categories:** Question

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## Concept

Embarking on the path of a [chartered crypto bank](https://prime.greeks.live/area/chartered-crypto-bank/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) signifies a fundamental shift from a loosely regulated environment to a paradigm of stringent oversight and institutional-grade accountability. The decision to obtain a banking charter, whether at the state or federal level, is a strategic move to gain legitimacy, access traditional financial systems, and build trust with a wider range of clients. This transition, however, comes with a significant and ongoing operational expense ▴ a comprehensive and multi-faceted compliance framework. The [ongoing compliance costs](https://prime.greeks.live/area/ongoing-compliance-costs/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) associated with operating a chartered crypto bank are not a mere line item on a balance sheet; they represent a foundational pillar of the institution’s design and a critical factor in its long-term viability.

> A federal charter simplifies regulatory compliance for crypto firms that are otherwise state-chartered, but also subjects them to more rigorous regulatory scrutiny.

At its core, a [chartered crypto](https://prime.greeks.live/news/ethereum-treasury-companies-outperform-spot-etfs-according-to-standard-chartered/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) bank must operate under the same fundamental principles of safety and soundness as any traditional financial institution. This means adhering to a complex web of regulations designed to protect consumers, prevent financial crime, and ensure the stability of the financial system. The primary drivers of [ongoing compliance](https://prime.greeks.live/question/how-does-model-drift-impact-a-firms-ongoing-compliance-with-best-execution-obligations/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) costs can be categorized into several key domains ▴ anti-money laundering (AML) and know-your-customer (KYC) obligations, robust cybersecurity measures, stringent capital adequacy requirements, and comprehensive regulatory reporting. Each of these domains represents a significant operational undertaking, requiring dedicated personnel, advanced technology, and a culture of compliance that permeates every level of the organization.

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## The Unseen Costs of Legitimacy

While the direct costs of compliance, such as salaries for compliance officers and software licensing fees, are readily apparent, there are also significant indirect costs to consider. The process of obtaining and maintaining a charter necessitates a substantial investment in legal and consulting services to navigate the complex application and examination processes. Furthermore, the operational constraints imposed by [regulatory requirements](https://prime.greeks.live/area/regulatory-requirements/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) can impact business agility and product development, as new offerings must be vetted for compliance before they can be brought to market. The reputational risk of non-compliance is another critical consideration, as a single regulatory misstep can have far-reaching consequences for a [crypto bank](https://prime.greeks.live/area/crypto-bank/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite)’s brand and its ability to attract and retain customers.

![A multi-segmented sphere symbolizes institutional digital asset derivatives. One quadrant shows a dynamic implied volatility surface](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocol-liquidity-management.jpg)

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## Strategy

A strategic approach to managing [compliance costs](https://prime.greeks.live/question/what-are-the-long-term-operational-costs-associated-with-maintaining-cat-compliance/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) is essential for the long-term success of a chartered crypto bank. This involves a delicate balance between meeting regulatory obligations and maintaining operational efficiency. A well-defined compliance strategy should be proactive, risk-based, and deeply integrated into the bank’s overall business model.

It should also leverage technology to automate processes, enhance accuracy, and provide real-time insights into the institution’s compliance posture. The strategic management of compliance costs begins with a thorough understanding of the regulatory landscape and the specific requirements of the chartering authority, whether it be the Office of the Comptroller of the Currency (OCC) at the federal level or a state banking regulator.

> The application for bank charters by crypto companies signifies a significant shift in the industry’s approach to regulatory compliance and operational expansion.

A key element of a successful compliance strategy is the development of a robust internal control framework. This framework should encompass all aspects of the bank’s operations, from customer onboarding and [transaction monitoring](https://prime.greeks.live/question/how-does-the-monitoring-of-information-leakage-in-rfq-protocols-differ-from-monitoring-lit-market-execution/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) to cybersecurity and data privacy. It should also include clear policies and procedures, regular employee training, and an independent audit function to ensure that controls are effective and consistently applied. By establishing a strong internal control framework, a chartered crypto bank can not only mitigate compliance risks but also create a more resilient and trustworthy institution.

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## Navigating the Regulatory Maze a Strategic Imperative

The regulatory landscape for crypto-assets is complex and constantly evolving, with multiple federal and state agencies asserting jurisdiction. A chartered crypto bank must navigate the requirements of a host of regulators, including the OCC, the Financial Crimes Enforcement Network (FinCEN), the Securities and Exchange Commission (SEC), and the Commodity Futures Trading Commission (CFTC), among others. Each of these agencies has its own set of rules and expectations, and a failure to comply with any one of them can result in significant penalties. A strategic approach to regulatory management involves developing a comprehensive understanding of the applicable regulations, establishing clear lines of communication with regulators, and proactively engaging with them to address any potential issues.

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## Key Regulatory Frameworks and Their Cost Implications

The following table provides a high-level overview of the key regulatory frameworks that a chartered crypto bank must adhere to and their associated cost implications.

| Regulatory Framework | Key Requirements | Primary Cost Drivers |
| --- | --- | --- |
| Bank Secrecy Act (BSA) / Anti-Money Laundering (AML) | Customer Identification Program (CIP), customer due diligence (CDD), transaction monitoring, suspicious activity reporting (SAR) | AML/KYC software, compliance personnel, employee training, transaction analysis tools |
| Office of Foreign Assets Control (OFAC) Sanctions | Screening of customers and transactions against OFAC sanctions lists | Sanctions screening software, ongoing monitoring, reporting |
| Cybersecurity Regulations (e.g. NYDFS Part 500) | Risk assessments, penetration testing, incident response planning, data encryption, access controls | Cybersecurity personnel, security software and hardware, third-party security audits |
| Capital Adequacy Requirements (e.g. Basel III) | Maintaining minimum capital reserves based on risk-weighted assets | Opportunity cost of capital, capital planning and stress testing models |
| Consumer Protection Laws (e.g. Dodd-Frank Act) | Fair lending practices, clear and accurate disclosures, complaint resolution processes | Compliance personnel, legal review of products and marketing materials, customer service training |

![An abstract digital interface features a dark circular screen with two luminous dots, one teal and one grey, symbolizing active and pending private quotation statuses within an RFQ protocol. Below, sharp parallel lines in black, beige, and grey delineate distinct liquidity pools and execution pathways for multi-leg spread strategies, reflecting market microstructure and high-fidelity execution for institutional grade digital asset derivatives](https://options.greeks.live/wp-content/uploads/2025/08/institutional-digital-asset-derivatives-rfq-protocol-displaying-multi-leg-execution-status-and-optimal-liquidity-pathways.jpg)

## The Technology-Driven Compliance Function

In the digital-native world of crypto-assets, technology plays a pivotal role in managing compliance costs and enhancing effectiveness. A modern [compliance program](https://prime.greeks.live/question/what-is-the-role-of-the-board-of-directors-in-overseeing-a-firms-compliance-program/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) should leverage a suite of integrated technologies to automate manual processes, improve data quality, and provide real-time risk insights. Blockchain analytics tools, for example, can be used to trace the origin of crypto-assets and identify high-risk transactions.

Artificial intelligence and machine learning algorithms can be employed to detect sophisticated money laundering schemes and reduce the number of false positives in transaction monitoring. By investing in a robust and integrated technology stack, a chartered crypto bank can create a more efficient and effective compliance function, ultimately reducing its long-term compliance costs.

- **Automated Transaction Monitoring** ▴ Real-time analysis of blockchain transactions to identify suspicious activity and potential sanctions violations. 

- **AI-Powered Risk Scoring** ▴ Dynamic risk assessment of customers and counterparties based on a wide range of data points. 

- **RegTech for Reporting** ▴ Automated generation and submission of regulatory reports to various authorities. 

- **Secure Digital Identity Solutions** ▴ Streamlined and secure customer onboarding and ongoing due diligence. 

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## Execution

The execution of a compliance program for a chartered crypto bank is a complex and resource-intensive undertaking. It requires a dedicated team of professionals with expertise in both traditional banking regulations and the unique challenges of the crypto-asset ecosystem. It also necessitates a significant investment in technology and infrastructure to support the bank’s compliance activities.

The ongoing costs of executing a compliance program can be substantial, and they must be carefully managed to ensure the bank’s profitability and long-term sustainability. A detailed understanding of the various cost components is essential for effective budgeting and resource allocation.

> The total cost of financial crime compliance in the APAC study countries has reached U.S.$45 billion.

The execution of a compliance program can be broken down into several key workstreams, each with its own set of activities and associated costs. These workstreams include customer due diligence, transaction monitoring, regulatory reporting, cybersecurity, and corporate governance. Each of these areas must be managed with a high degree of rigor and attention to detail to ensure that the bank remains in full compliance with all applicable laws and regulations. The following sections provide a more granular breakdown of the ongoing compliance costs associated with operating a chartered crypto bank.

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## A Granular View of Ongoing Compliance Costs

The following table provides a detailed breakdown of the various cost categories associated with maintaining a robust compliance program for a chartered crypto bank.

| Cost Category | Description | Illustrative Annual Cost Range (for a mid-sized institution) |
| --- | --- | --- |
| Personnel Costs | Salaries, benefits, and training for compliance staff, including a Chief Compliance Officer, AML analysts, KYC specialists, and legal counsel. | $1,000,000 – $3,000,000+ |
| Technology and Infrastructure | Licensing and maintenance fees for AML/KYC software, transaction monitoring systems, blockchain analytics tools, cybersecurity solutions, and regulatory reporting platforms. | $500,000 – $2,000,000+ |
| Third-Party Services | Fees for external auditors, legal firms for regulatory advice, consultants for compliance program reviews, and penetration testing services. | $250,000 – $1,000,000+ |
| Regulatory Fees and Insurance | Annual charter renewal fees, FDIC insurance premiums (if applicable), and cyber insurance policies. | $100,000 – $500,000+ |
| Capital and Liquidity Costs | The opportunity cost of holding required capital and liquidity reserves, which cannot be deployed for revenue-generating activities. | Variable, but can be substantial |

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## Core Compliance Activities a Perpetual Cycle

The ongoing execution of a compliance program involves a continuous cycle of activities designed to identify, assess, and mitigate compliance risks. These activities are not one-time events but rather an integral part of the bank’s day-to-day operations. The following list outlines some of the core compliance activities that a chartered crypto bank must perform on an ongoing basis.

- **Risk Assessments** ▴ Regular and comprehensive assessments of the bank’s products, services, customers, and geographic locations to identify and measure compliance risks. 

- **Policy and Procedure Updates** ▴ Ongoing review and revision of the bank’s compliance policies and procedures to reflect changes in regulations, business activities, and the risk environment. 

- **Employee Training** ▴ Regular training for all employees on their compliance responsibilities, including AML, KYC, data privacy, and cybersecurity. 

- **Suspicious Activity Monitoring and Reporting** ▴ Continuous monitoring of customer transactions to detect and report suspicious activity to FinCEN in a timely manner. 

- **Regulatory Examinations** ▴ Preparation for and participation in regular examinations by the bank’s chartering authority and other relevant regulators. 

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## References

- Accenture. (2017, January 17). Blockchain Technology Could Reduce Investment Banks’ Infrastructure Costs by 30 Percent, According to Accenture Report. Accenture Newsroom.

- Basel Committee on Banking Supervision. (2023, February 15). Crypto-assets ▴ a new standard for banks. Bank for International Settlements.

- Chartis Research. (2024, May 15). The cost of regulatory reporting.

- Coin World. (2025, March 19). Crypto Firms Seek Bank Charters for Regulatory Compliance, Expansion. AInvest.

- Saulsbery, G. (2025, April 23). Coinbase considers applying for federal bank charter. Banking Dive.

- Skadden, Arps, Slate, Meagher & Flom LLP. (2024, August 12). Bank Capital Standards for Cryptoasset Exposures Under the Basel Framework.

- Forrester Consulting. (2024, March 7). Asia Pacific Financial Crime Compliance Costs Reach USD $45 Billion Annually.

- Solanki, S. (2025, March 21). Cryptocurrency laws and regulations. Thomson Reuters.

- PKWARE. (2025, January 23). The True Cost of a Data Breach in Banking and Financial Services.

- Data Zoo. (2025, March 11). The Critical Role of KYC & AML Compliance in Cryptocurrency.

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## Reflection

The journey of a chartered crypto bank is one of navigating a complex and evolving landscape of risk and regulation. The ongoing compliance costs are not merely an expense to be minimized but a strategic investment in the institution’s long-term resilience and growth. By embracing a proactive, technology-driven, and risk-based approach to compliance, a chartered crypto bank can not only meet its regulatory obligations but also build a foundation of trust with its customers, regulators, and the broader financial ecosystem. The ultimate measure of success will be the ability to integrate a robust compliance framework seamlessly into the fabric of the organization, transforming it from a cost center into a source of competitive advantage.

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## Glossary

<a href="https://prime.greeks.live/area/ongoing-compliance-costs/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Detailed metallic disc, a Prime RFQ core, displays etched market microstructure. Its central teal dome, an intelligence layer, facilitates price discovery](https://options.greeks.live/wp-content/uploads/2025/07/principal-operating-system-intelligence-layer-powering-digital-asset-derivatives-rfq-protocols-for-optimal-execution.jpg)

## Ongoing Compliance Costs

Meaning ▴ Ongoing compliance costs refer to the recurring expenditures incurred by financial institutions, including those operating within the crypto sector, to continuously meet regulatory requirements, industry standards, and internal policy mandates. </a><a href="https://prime.greeks.live/area/chartered-crypto-bank/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Abstract metallic components, resembling an advanced Prime RFQ mechanism, precisely frame a teal sphere, symbolizing a liquidity pool. This depicts the market microstructure supporting RFQ protocols for high-fidelity execution of digital asset derivatives, ensuring capital efficiency in algorithmic trading](https://options.greeks.live/wp-content/uploads/2025/07/precision-engineered-institutional-digital-asset-derivatives-prime-os-architecture-driving-rfq-protocol-execution-and-capital-efficiency-optimization.jpg)

## Chartered Crypto Bank

Meaning ▴ A chartered crypto bank represents a financial institution that has secured a formal operating license from a recognized regulatory authority, enabling it to provide traditional banking services, such as deposits, loans, and payments, while also dealing with digital assets like cryptocurrencies. </a><a href="https://prime.greeks.live/question/how-does-model-drift-impact-a-firms-ongoing-compliance-with-best-execution-obligations/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A sophisticated mechanical core, split by contrasting illumination, represents an Institutional Digital Asset Derivatives RFQ engine. Its precise concentric mechanisms symbolize High-Fidelity Execution, Market Microstructure optimization, and Algorithmic Trading within a Prime RFQ, enabling optimal Price Discovery and Liquidity Aggregation](https://options.greeks.live/wp-content/uploads/2025/07/prime-os-rfq-engine-for-institutional-digital-asset-derivatives-precision-execution.jpg)

## Ongoing Compliance

Model drift silently degrades execution algorithms, turning a tool for compliance into a source of best execution violations. </a><a href="https://prime.greeks.live/news/ethereum-treasury-companies-outperform-spot-etfs-according-to-standard-chartered/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Intricate metallic mechanisms portray a proprietary matching engine or execution management system. Its robust structure enables algorithmic trading and high-fidelity execution for institutional digital asset derivatives](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-engine-market-microstructure.jpg)

## Chartered Crypto

This analysis dissects the structural advantages of Ethereum treasury companies over traditional spot ETFs, highlighting their superior operational architecture for yield generation and regulatory optimization. </a><a href="https://prime.greeks.live/area/regulatory-requirements/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A precision-engineered, multi-layered system visually representing institutional digital asset derivatives trading. Its interlocking components symbolize robust market microstructure, RFQ protocol integration, and high-fidelity execution](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocols-high-fidelity-execution-4.jpg)

## Regulatory Requirements

Meaning ▴ Regulatory Requirements refer to the comprehensive set of rules, laws, and guidelines imposed by governmental bodies or supervisory authorities that financial institutions and market participants must obey. </a><a href="https://prime.greeks.live/area/crypto-bank/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Metallic rods and translucent, layered panels against a dark backdrop. This abstract visualizes advanced RFQ protocols, enabling high-fidelity execution and price discovery across diverse liquidity pools for institutional digital asset derivatives](https://options.greeks.live/wp-content/uploads/2025/07/precision-market-microstructure-for-institutional-digital-asset-derivatives-rfq.jpg)

## Crypto Bank

Meaning ▴ A Crypto Bank signifies a financial institution that integrates traditional banking services with offerings specific to digital assets, operating within a regulated framework. </a><a href="https://prime.greeks.live/question/what-are-the-long-term-operational-costs-associated-with-maintaining-cat-compliance/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
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## Compliance Costs

Maintaining CAT compliance entails managing significant, recurring costs for data infrastructure and direct regulatory fees based on transaction volume. </a><a href="https://prime.greeks.live/question/how-does-the-monitoring-of-information-leakage-in-rfq-protocols-differ-from-monitoring-lit-market-execution/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A metallic rod, symbolizing a high-fidelity execution pipeline, traverses transparent elements representing atomic settlement nodes and real-time price discovery. It rests upon distinct institutional liquidity pools, reflecting optimized RFQ protocols for crypto derivatives trading across a complex volatility surface within Prime RFQ market microstructure](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-trade-execution-pipeline-optimizing-rfq-protocols-for-best-execution-and-capital-efficiency.jpg)

## Transaction Monitoring

Monitoring RFQ leakage involves profiling trusted counterparties' behavior, while lit market monitoring means detecting anonymous predatory patterns in public data. </a><a href="https://prime.greeks.live/question/what-is-the-role-of-the-board-of-directors-in-overseeing-a-firms-compliance-program/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Precision-engineered device with central lens, symbolizing Prime RFQ Intelligence Layer for institutional digital asset derivatives. Facilitates RFQ protocol optimization, driving price discovery for Bitcoin options and Ethereum futures](https://options.greeks.live/wp-content/uploads/2025/07/high-fidelity-institutional-rfq-protocol-engine-for-digital-asset-derivatives-options-trading.jpg)

## Compliance Program

The board of directors provides strategic oversight of a firm's compliance program, ensuring ethical conduct and mitigating risk. </a>

**Tags:** [Chartered Crypto Bank](https://options.greeks.live/area/chartered-crypto-bank/), [Crypto Bank](https://options.greeks.live/area/crypto-bank/), [Capital Adequacy](https://options.greeks.live/area/capital-adequacy/), [Regulatory Reporting for Crypto](https://options.greeks.live/area/regulatory-reporting-for-crypto/), [FinCEN Regulations](https://options.greeks.live/area/fincen-regulations/), [Regulatory Requirements](https://options.greeks.live/area/regulatory-requirements/)	

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- 
### [What Are the Arguments for a Principles-Based Approach to CCP Capital Requirements over a Prescriptive One?](https://options.greeks.live/question/what-are-the-arguments-for-a-principles-based-approach-to-ccp-capital-requirements-over-a-prescriptive-one/)
![Polished metallic disks, resembling data platters, with a precise mechanical arm poised for high-fidelity execution. This embodies an institutional digital asset derivatives platform, optimizing RFQ protocol for efficient price discovery, managing market microstructure, and leveraging a Prime RFQ intelligence layer to minimize execution latency.](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-precision-execution-via-advanced-rfq-protocols-and-prime-os-intelligence-layer-for-optimal-market-microstructure.jpg)

A principles-based approach aligns CCP capital with its unique risk profile, fostering a more dynamic and resilient financial system.

- 
### [What Are the Main Differences between Risk-Based Capital Requirements and the Leverage Ratio?](https://options.greeks.live/question/what-are-the-main-differences-between-risk-based-capital-requirements-and-the-leverage-ratio/)
![A polished, teal-hued digital asset derivative disc rests upon a robust, textured market infrastructure base, symbolizing high-fidelity execution and liquidity aggregation. Its reflective surface illustrates real-time price discovery and multi-leg options strategies, central to institutional RFQ protocols and principal trading frameworks.](https://options.greeks.live/wp-content/uploads/2025/07/digital-asset-derivatives-rfq-protocols-high-fidelity-institutional-execution.jpg)

Risk-based capital aligns capital with asset risk, while the leverage ratio provides a simple backstop based on total exposure.

- 
### [How Does the Basel III Output Floor Limit the Capital Benefits of Using Internal Models?](https://options.greeks.live/question/how-does-the-basel-iii-output-floor-limit-the-capital-benefits-of-using-internal-models/)
![An exposed institutional digital asset derivatives engine reveals its market microstructure. The polished disc represents a liquidity pool for price discovery. Internal mechanisms highlight high-fidelity execution, algorithmic trading, and robust RFQ protocol for block trade settlement via a Prime RFQ.](https://options.greeks.live/wp-content/uploads/2025/07/high-fidelity-digital-asset-derivatives-rfq-execution-system.jpg)

The Basel III output floor sets a lower bound on a bank's capital requirements, limiting model-derived benefits to 27.5% below standardized measures.

- 
### [What Are the Key Differences between Bottom up and Top down Stress Testing Approaches?](https://options.greeks.live/question/what-are-the-key-differences-between-bottom-up-and-top-down-stress-testing-approaches/)
![A polished, dark teal institutional-grade mechanism reveals an internal beige interface, precisely deploying a metallic, arrow-etched component. This signifies high-fidelity execution within an RFQ protocol, enabling atomic settlement and optimized price discovery for institutional digital asset derivatives and multi-leg spreads, ensuring minimal slippage and robust capital efficiency.](https://options.greeks.live/wp-content/uploads/2025/08/quantitative-finance-driven-rfq-workflow-for-best-execution-in-digital-assets.jpg)

Bottom-up stress tests analyze risk from individual assets up; top-down tests apply macro shocks to the whole firm.

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---

**Original URL:** https://options.greeks.live/question/what-are-the-ongoing-compliance-costs-associated-with-operating-a-chartered-crypto-bank/
