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FATF "Travel Rule" and its implications

Discussion in 'General Discussion' started by qwizzie, Sep 17, 2019.

  1. qwizzie

    qwizzie Well-known Member

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

    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).
     
    #1 qwizzie, Sep 17, 2019
    Last edited: Sep 17, 2019
  2. AgnewPickens

    AgnewPickens Moderator
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    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.
     
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  3. qwizzie

    qwizzie Well-known Member

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

    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.
     
    #3 qwizzie, Sep 17, 2019
    Last edited: Sep 17, 2019
  4. AgnewPickens

    AgnewPickens Moderator
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    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.
     
  5. qwizzie

    qwizzie Well-known Member

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    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 ?
     
    #5 qwizzie, Sep 17, 2019
    Last edited: Sep 17, 2019
  6. AgnewPickens

    AgnewPickens Moderator
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    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.
     
  7. GrandMasterDash

    GrandMasterDash Well-known Member
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    Getting Dash on Kyber would be great. They have compliance from their website but not on the protocol.
     
  8. akhavr

    akhavr Active Member

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    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.
     
  9. qwizzie

    qwizzie Well-known Member

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

    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/
    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.

    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),
     
    #9 qwizzie, Sep 18, 2019
    Last edited: Sep 18, 2019
  10. akhavr

    akhavr Active Member

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    You sound as if this "recommendation" was issued to actually combat terrorist financing... :)
     
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  11. qwizzie

    qwizzie Well-known Member

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

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

     
    #11 qwizzie, Sep 18, 2019
    Last edited: Sep 18, 2019
  12. AgnewPickens

    AgnewPickens Moderator
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    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.
     

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