Many cryptocurrency companies are preparing for the upcoming Financial Action Task Force (FATF) rules for cryptocurrencies, especially travel rules. This month, 25 virtual asset service providers (VASP) published a paper outlining how the US VASP aims to comply with the FATF Travel Rule.
In the eyes of global regulators, digital currency companies (also known as virtual asset service providers (VASP)) have expressed concern about this year’s regulation and compliance. In fact, in the latest report written by the Digital Currency Group (DCG), the survey results show that more than 150 cryptocurrency executives say that regulation is a top priority. Currently, many cryptocurrency companies are making plans to comply with travel rules.
“Travel Rules” is a descriptive label for the Bank Secrecy Act (BSA) rules [31 CFR 103.33(g)]. Basically, the rule requires that all companies that handle finance must pass the transmission data (such as KYC/AML) to the next financial institution. The financial regulator explained: “The fund transfer rules are designed to help law enforcement agencies detect, investigate, and prosecute money laundering and other financial crimes by retaining information about people who send and receive funds through the fund transfer system.”
As early as June 2019, the FATF issued the “Explanatory Notes for Recommendation 15,” which required VASP to comply with the anti-money laundering (AML) and counter-terrorism financing (CFT) guidelines of the regulatory agency. The FATF’s recommendations on digital currency business also stated that VASP must also comply with travel rules.
Recently, the Financial Action Task Force (FATF) announced the FATF plenary meeting on June 30, 2020. The documents show that cryptocurrency companies will receive a 12-month extension to comply with travel rules. This rule will apply to VASP when the customer transfers funds over US$3,000, and the VASP will need to share KYC/AML information about the service customer.
FATF’s travel rules led to the establishment of the United States Travel Rules Working Group (USTRWG), which recently published an article titled “Travel Rules Solutions.”
The USTRWG document states that the working group recognizes that the regulatory landscape is constantly changing and is still developing on a global scale. The team detailed how these specific U.S. VASPs plan to comply with travel rules in a paper dated “October 2020.”
The USTRWG paper said: “The ultimate goal of the USTRWG is to address the three key components of the industry’s travel rules compliance applicable to the virtual currency industry: (1) governance, (2) reliable counterparty identification, and (3) security. Data transfer.” is displayed.
“The USTRWG solution addresses these functions by proposing the following suggestions: (1) help to form a trusted VASP network governance structure; (2) a centralized “bulletin board” mechanism for identifying counterparties, and (3) Encrypted, point-to-point communication channels to securely transmit required travel rules information between VASPs.” The author of the paper added. Of course, the U.S. Trade Representative’s task force understands that solutions and phased implementation methods will vary across countless global jurisdictions.
The USTRWG document further states:
The solution is designed to meet the governance, technical and security requirements raised by travel rules compliance. The solution initially addressed the requirements of the United States Travel Rules and will gradually develop over time to achieve compliance across different jurisdictions.
The USTRWG’s attempts to comply are not static, and it is uncertain whether the regulatory agency will approve such coordination. With the 12-month extension, VASP expects that FATF’s travel rules will take effect in June 2021. The USTRWG document states that the working group is very “committed to effectively implementing travel rules solutions.”
In addition, the working group also detailed a future USTRWG publication that will explain the situation and developments in the VASP community.
The author of the paper added: “Ultimately, the vision and goal of the USTRWG and the proposed solution is to establish a VASP network to standardize the VASP discovery/identification process and the transmission of travel rules data across multiple regulatory systems.”
What do you think of the upcoming travel rules and the recently established USTRWG? Let us know your thoughts on this topic in the comments section below.
Picture Credits: Shutterstock, Pixabay, Wiki Commons, USTRWG white paper,
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