FATF "Travel Rule" and its implications

[qwizzie]

Link : https://ciphertrace.com/fatf-crypto-travel-rule/

Governments have a new “travel rule” coming your way, and it has nothing to do with what you can put in your carry-on. In guidance released on June 21, 2019, the Financial Action Task Force (FATF) updated its recommendation regarding the need to adequately mitigate the money laundering and terrorist financing risks associated with virtual asset activities. Cryptocurrency exchanges and other virtual asset businesses are struggling with the meaning and impact of this new guidance, which, once adopted by FATF member countries, will require them to pass customer information to each other when transferring crypto assets. This is similar to the standard that U.S. banks are required to abide by for wire transfers under the Bank Secrecy Act (BSA), which is often referred to as the “Travel Rule.”

FATF standards do not dictate exactly how cryptocurrency exchanges must collect, verify or transfer this information, only stating that it is not necessary to attach the information directly to the transfers. This has left exchanges around the world scratching their collective heads and wondering how to implement these rules while preserving privacy. The difficulty in applying these recommendations to exchanges becomes clear when compared to the formal banking system. Whereas banks rely on established interbank communication systems to move funds, cryptocurrencies are quickly and easily moved by simply using a recipient’s public address of which exchanges often have no way of verifying ownership.

The FATF "Travel Rule" is the sole reason South Korean exchange OKEX dropped support for Monero, Dash, Zcash, Horizen and Super Bitcoin.
It is also most likely the reason why Coinbase UK delisted Zcash.

What i dont understand is when Dash can be made compliable to that "travel rule" with 99% of its public transactions
(after all only 1% of the Dash transactions are PrivateSend transactions), why is it still getting delisted ? Even Bitcoin can not
fully comply 100% with that travel rule, as they too have coin mixing active on their blockchain (a bit more centralized coin mixing, but still).

How worried should we be about this new rule and how much resistance is there against this rule by exchanges ?
(i hear Binance and Coinbase are ignoring that rule for now).

 

[AgnewPickens]

How worried should we be about this new rule and how much resistance is there against this rule by exchanges ?
(i hear Binance and Coinbase are ignoring that rule for now).

Binance and Coinbase are not ignoring the travel rule, the rule applies to exchanges sharing user info with each other and restricting which addresses can deposit to or withdraw from
exchanges, I expect we will see them institute some sort of mandatory whitelist feature, this will make using a centralized exchange onerous and hopefully will drive the next phase of
exchange trading on DEXes, that do not fall under the travel rule guidelines.

 

[qwizzie]

Binance and Coinbase are not ignoring the travel rule, the rule applies to exchanges sharing user info with each other and restricting which addresses can deposit to or withdraw from
exchanges, I expect we will see them institute some sort of mandatory whitelist feature, this will make using a centralized exchange onerous and hopefully will drive the next phase of
exchange trading on DEXes, that do not fall under the travel rule guidelines.

Binance Teases FATF, Allows Lending via Privacy Coins
https://www.newsbtc.com/2019/09/17/binance-teases-fatf-allows-lending-via-privacy-coins/amp/

Recognizing the privacy coins anonymized people involved in a financial transaction, OKEx believed removing them was the only option left to ensure FATF-compliance. Nevertheless, its rival Binance decided to the opposite by adding them to its new lending platform. The Binance chief executive & co-founder Changpeng “CZ” Zhao tweeted a cryptic message in support of financial privacy.

“Do you think privacy is a fundamental right?” the message read.

It does look to me that OKEx and Binance view FATF compliance (including the travel rule) differently.
And i wonder what the view on this is with other (major) exchanges. And with Coinbase adding Dash
to a fiat trading pair, how are they technically still in compliance with this new FATF ruling ?

Unless this FATF ruling is not mandatory and not all exchanges are actually supporting it.
Which i suspect is the case.

 

[AgnewPickens]

OKEx has much stronger rules than the FATF travel rule in SK to worry about, but they were the only SK exchange to do so. But the big impact of the travel rule
will be the rise of DEX trading, where the rule doesn't apply.

 

[qwizzie]

OKEx has much stronger rules than the FATF travel rule in SK to worry about, but they were the only SK exchange to do so. But the big impact of the travel rule
will be the rise of DEX trading, where the rule doesn't apply.

The problem with DEX trading will be a lack of liquidity, maybe if they really do get a lot of traction that will fix itself.
But it will take a lot of time. Also i wonder how DEX's connect to fiat gateways , are they not vulnerable to government control there ? Or do DEX's only handle crypto to crypto trading ?

 

[AgnewPickens]

Think most of them use stable coins, either their own, like BitShares and its Bit derivatives, or existing stable coins. They have USDT on BitShares DEX, last time I withdrew, withdrawal fee was only 2 USDT. But yes, liquidity will have to come from users, and program trading is not really workable for most DEXes, so it is almost entirely organic volume.

 

[GrandMasterDash]

Getting Dash on Kyber would be great. They have compliance from their website but not on the protocol.

 

[akhavr]

Getting Dash on Kyber would be great. They have compliance from their website but not on the protocol.

Until there would be a way to do secure decentralized 2way swap from Dash to Ethereum, there won't be Dash on Kyber.

OTOH, I expect soon it will be possible to create a Dash synthetic on Ethereum and facilitate trades this way.

 

[qwizzie]

Link : https://cryptoiq.co/okex-korea-to-delist-privacy-coins-for-violation-of-fatf-travel-rule/

A spokesperson for OKEx stated that the coins violate the laws and regulations of major institutions and agencies. The exchange is thus taking necessary steps against coins not abiding by the travel rule, added the spokesperson. The exchange refers to the coins as dark coins that they will not be listing from October on.

Thats pretty ironic.

The travel rule has been a requirement for some time for international banks whenever they transact business on behalf of the customer.
It has however been subject to discussion in the cryptocurrency industry often described as onerous and infringing on user privacy.
The FATF completed recommendations to 37 of its member countries in the summer. The recommendations included the controversial
“virtual asset service providers” that requires crypto exchanges to share customer information when transferring funds.

The agency gave member nations 12 months to implement the recommendation. Although it is not mandatory, countries not complying
could find themselves on a financial blacklist.

So it is indeed not mandatory, buts it is also unlikely countries would not intervene if exchanges not in compliance with FATF ruling
could cause those countries to be put on a financial black list.

However one has to wonder how likely it is that countries end up on a financial black list for possibly failing to apply FATF ruling
to their own local exchanges, when research already shows there is a very low level of money laundering and no funding of terrorists, through cryptocurrencies (FIAT is still much more used for that).

Also i'm still wondering about how final the FATF ruling (incl travel rule) exactly is ? The CypherTrace article mentions :

Link: https://ciphertrace.com/fatf-crypto-travel-rule/

CipherTrace was pleased to have an opportunity to offer recommendations on the draft of the FATF’s updated rules.
In our response, we advised: Today in cryptocurrencies, beneficiary information consists solely of a cryptocurrency address.
There is no “real world” connection between this address and a human being or a bank account or a correspondent VASP account.
These cryptocurrency addresses can be at another VASP or can be on a personally controlled computer or mobile phone, as a form
of digital cash.

Does this mean the FATF is updating their June rulings ? Or does this mean that the FATF has ignored recommendations and issued the
final FATF ruling in June ?

Update : looks like the FATF will do a 12 month review june 2020, maybe they will update their ruling then ? It also looks like the FATF does not focus specifically on privacy coins but on "virtual assets" in general, which is why the whole crypto scene and privacy movements are offended by this.

The FATF will monitor implementation of the new requirements by countries and service providers and conduct a 12-month review in June 2020.

Orlando, FL, United States, 21 June 2019 - The Financial Action Task Force (FATF) today adopted and issued an Interpretive Note to Recommendation 15 on New Technologies (INR. 15) that further clarifies the FATF’s previous amendments to the international Standards relating to virtual assets and describes how countries and obliged entities must comply with the relevant FATF Recommendations to prevent the misuse of virtual assets for money laundering and terrorist financing and the financing of proliferation.

Link : https://www.fatf-gafi.org/publicati...ocuments/public-statement-virtual-assets.html

I wonder if FATF recommended ruling goes directly against European laws, which are applicable to the protection of privacy of its European population. The travel rule will sent a buckload of privacy-sensitive european data into the outside world (world outside the European Union),

 

[akhavr]

However one has to wonder how likely it is that countries end up on a financial black list for possibly failing to apply FATF ruling
to their own local exchanges, when research already shows there is a very low level of money laundering and no funding of terrorists, through cryptocurrencies (FIAT is still much more used for that).

You sound as if this "recommendation" was issued to actually combat terrorist financing...

 

[qwizzie]

CipherTrace unveils open source solution for crypto Travel Rule compliance ‘TRISA’
https://tokenpost.com/CipherTrace-u...-for-crypto-Travel-Rule-compliance-TRISA-3369

“The goal of the Travel Rule Information Sharing Architecture (TRISA) is to enable compliance with the FATF and FinCEN
Travel Rules for cryptocurrency transaction identity information without modifying the core blockchain protocols, and without
incurring increased transaction costs or modifying virtual currency peer-to-peer transaction flows.”

The solution would enable VASPs to reliably share payment details while maintaining the confidentiality of personal information
and whale trades. It enables immediate compliance with minimal impact on transaction flows and without the need to fork existing
blockchains, CipherTrace explained.

Note : VASP's are Virtual Asset Service Providers (crypto exchanges / custodial wallet providers)

CipherTrace said that major exchanges and wallets, such as Binance, are already considering TRISA as a viable option for compliance.

 

[AgnewPickens]

Chainalysis is already working on FATF compliance software solutions for the industry, and I expect most retail investors will go ahead and volunteer the info
that exchanges will require as long as the KYC process is not too daunting. But for ideological investors, DEXes will become the most attractive option provided
they can generate liquidity based on trader activity. The impact of this travel rule already seems to have taken its biggest bite out of the altcoin sector, with
BTC market dom coming off a near 4 year high.

 

[petarchigo]

The FATF "Travel Rule" is the sole reason South Korean exchange OKEX dropped support for Monero, Dash, Zcash, Horizen and Super Bitcoin.
It is also most likely the reason why Coinbase UK delisted Zcash.

What i dont understand is when Dash can be made compliable to that "travel rule" with 99% of its public transactions
(after all only 1% of the Dash transactions are PrivateSend transactions), why is it still getting delisted ? Even Bitcoin can not
fully comply 100% with that travel rule, as they too have coin mixing active on their blockchain (a bit more centralized coin mixing, but still).

How worried should we be about this new rule and how much resistance is there against this rule by exchanges ?
(i hear Binance and Coinbase are ignoring that rule for now).[/QUOTE]
The impact of this travel rule already seems to have taken its biggest bite out of the altcoin sector, with
BTC market dom coming off a near 4 year high.

 

[camosoul]

Most governments seem to be on a path that guarantees violent redress of their absurd and evil "regulations." They're neo-Bolshevik and I can't imagine anyone is dumb enough to believe their "money laundering" and "muh terrorismz" nonsense anymore. This hot air is so worn out... It's been proven a lie so many times it's a joke. Like Feminists fighting the Patriarchy... Nobody is dumb enough to believe this is anything but out-of-control government lies. Government has made clear that they are the enemy and want total domination and enslavement. While they invent a fake medical crisis that has us fighting over toilet paper, they're working overtime converting their own money into it... They're desperate to keep as any people trapped on their sinking ships as possible. It's pure hate. They just want to cause as much misery and suffering as possible, and make sure no one can escape it. They're evil. The Devil is real and his name is Government. They're desperate to create mass violence. They're doing everything they can to provoke it.

BTC has been in bed with this satanic cult of baby raping communists for a while now. Since 2014, the objective has been to kill innovation and competition by manipulating corrupt governments around the world. These corrupt governments being happy to participate because they don't want cryptocurrency to advance, either.

The intentional misapplication of Capital Gains tax was just the beginning. It required the misnomer of cryptoASSET be applied to cryptoCURRENCIES which failed to actually be cryptoCURRENCIES. The deliberate conflation of the concepts is designed to promote fraudulent regulatory practices that only broken, half-assed cryptoASSETS can "comply." Anything other than broken junk is kept out of the market...

As a side note, all this storage, sharing and transmission of identity data is where all identity theft comes from. How could data breaches of this nature exist, if this information didn't exist? It serves no purpose to the transaction. It is quite literally "weapons-grade bullshit." Government is at fault for all identity theft and all fraud. Period. They are the ones who insist upon this data being created in the first place. It is simply not needed for commerce. Yet again, we see that Government is the creator of yet another of the world's biggest problems.

 

[Thomas Coello]

Under Recommendation 16’s Travel Rule, the originators and beneficiaries of all transfers of virtual funds ought to change identifying statistics. The rule will observe to all VASPs, economic institutions and obliged entities. Additionally, the originators and beneficiaries involved in a transfer ought to be able to guarantee the accuracy of the information they ship to the other.

 

[Devil1267]

Getting Dash on Kyber would be great. They have compliance from their website but not on the protocol.

 

[Aman12011]

BTC has been in bed with this satanic cult of baby raping communists for a while now. Since 2014, the objective has been to kill innovation and competition by manipulating corrupt governments around the world. These corrupt governments being happy to participate because they don't want cryptocurrency to advance, either.