The cryptocurrency industry is currently in a bid to implement new anti-money-laundering policies. These would order exchanges and other firms to share information about transactions that have been carried out.
One of the policies, which was adopted in June, mandates that crypto exchanges and other Blockchain-related firms provide its users’ names, account numbers, locations and other details to institutions. Institutions that are in charge of obtaining details of digital fund transfers, much like wire transfers in the banking sector. This policy aims to assist the FATF to monitor suspicious activities. This policy is called the ‘Travel Rule’.
The Financial Action Task Force was incepted in 1989 by the G7 nations, to exercise frequent evaluations of anti-money-laundering laws in the 37 member countries of the G7. Receiving a negative evaluation from the body means that the country in question could face restrictions on access to financial systems and other sanctions.
FATF is the commanding body for anti-money-laundering policies of the world. Their standards help prevent regulatory arbitrage across the globe, as well as to demand standard cryptocurrency regulations.
The travel rule can also be used to create an audit trail for investigators to use in cases of terrorist attacks.
The guideline demand that crypto firms must communicate customer data to other financial institutions when facilitating transactions above $1,000.
However, implementing the travel rule on crypto firms has been a tough venture, as this industry does not traditionally have the infrastructure to provide this information.
The industry is currently facing challenges with developing an approach for sending and receiving customer information in a safe and standardized manner. Executives of crypto firms have said that there have been meetings about creating solutions from technology providers. They have also mentioned that it might take several months to develop a solution.
Already, cryptocurrency exchange OKEx Korea has mentioned 5 crypto coins that would be delisted from the exchange. The delisting is scheduled to take place on the 10th of October. This action was taken due to a violation of the FATF’s travel rule.
What the Travel Rule Means for Crypto
The requirements by the FATF have been criticized heavily in the crypto community. There have been complaints across the industry, about how this regulation is non-conforming to the cultural values about how cryptocurrencies are supposed to facilitate transactions anonymously. There have also been claims that this new rule would be very unfavorable and costly to crypto startups.
Additionally, there is a worry that the travel rule could cause frustrated users to gravitate towards unregulated peer-to-peer transactions.
The coming months will be a trying period for crypto.