- Global regulatory oversight increases as the UK falls in line with FATF compliance.
- FATF compliance among jurisdictions has been slow off the mark.
- Concerns remain over the intrusive nature of the Travel Rule.
The increasingly stringent regulatory climate remains a contention within the crypto industry. Tighter controls may protect users and prevent fraud, but critics raise concerns about privacy invasion.
Weighing in on the matter, the UK’s Financial Conduct Authority (FCA) has issued a statement informing that UK crypto businesses must comply with the Travel Rule from September 1.
FCA to Enforce Travel Rule
FATF is an intergovernmental body headquartered in Paris, France, tasked with combating global money laundering and terrorist financing. The organization comprises 39 member countries but influences non-members to commit to its financial crime standards.
The Travel Rule is a FATF recommendation to do with guidelines for Virtual Asset Service Providers (VASPs) to prevent money laundering and terrorist financing. Specifically, VASPs are required to collect and disclose the sender and recipient details of cryptocurrency transfers, either during or before the transaction.
The FCA said it had “worked closely with industry” to develop appropriate guidance on compliance before the September 1 deadline. It stated that all VASPs are responsible for achieving compliance, even in cases of using third-party suppliers. Furthermore, the FCA expects UK firms to implement the same standards in overseas jurisdictions, even if that jurisdiction has not adopted the Travel Rule.
In a move that will spark controversy, the UK regulator also told firms receiving crypto from a non-Travel Rule jurisdiction to consider not releasing funds to the recipient if data is missing or incomplete. The statement read:
“The UK cryptoasset business should take these factors into account when making a risk-based assessment of whether to make the cryptoassets available to the beneficiary.”
In 2021, Coin Center’s Director of Research, Peter Van Valkenburgh, slammed a draft guidance document from the FATF, calling the organization’s approach undemocratic and tantamount to warrantless surveillance.
Slow Implementation of Travel Rule
In June, FATF reported concerns about the slow implementation of VASP guidance. It said that of the 151 countries that responded to its survey, more than half had not implemented the Travel Rule. The organization said it would continue contacting non-compliant jurisdictions and provide assistance where necessary.
On the Flipside
- Travel Rule compliance places an administrative burden on crypto businesses.
- Rules on collecting the data of crypto users assume everyone is a criminal.
Why This Matters
The FCA has fallen in line with VASP requirements signaling a degree of inevitability to FATF compliance. Although this is a necessity on the path to mass adoption, there is no escaping from the Travel Rule’s intrusive nature.
Find out how FATF rules have impacted privacy coins:
Privacy Coins: What Are They and Why Should You Be Concerned?
Are US regulators softening their stance toward cryptocurrency? Read here:
Coinbase’s Futures Triumph: A Turning Point for Crypto Regulation?