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Despite the general decentralisation found in the cryptocurrency industry, users of cryptocurrencies across the board are willing to comply with the new rule of the Financial Action Task Force (FATF) that will work with regulators and legal compliance.
What is the FATF Travel Rule?
The Travel Rule, a regulation by the FATF, is a protocol for cryptocurrency-focused companies, including exchanges, digital wallet providers, and platforms and firms that exchange, store, safe keep, transfer, convert and sell digital assets. The rule ensures that virtual asset service providers (VASPs) are required to disclose specific customer information and data when cryptocurrency assets are transacted across a specific threshold. The Travel Rule requires that platforms and financial platforms share the data from the sender and recipient data with each other during customer transactions. This is where the regulation gets its name: The information of the transacting user ‘travels’ along with the transferred funds or assets.
Initially, only banks fell under the Travel Rule. Since 2020, however, the FATF extended this rule to cryptocurrency companies in order to limit the opportunity for money laundering. The Travel Rule is the common name for FATF Recommendation #16.
Are companies willing to comply with the Travel Rule?
According to a survey conducted by New York-based crypto compliance firm Notabene, the majority of crypto companies are either already practising the protocol in the regulations or are planning to complete their compliance before the second half of the financial year is over. The results from the survey show that approximately 70% of the respondents are willing to onboard the Travel Rule protocols into their operations.
56 businesses and companies across the world were surveyed, of which 45% are based in the Asia Pacific region, 30% are in Europe, Middle-East and Africa, and 25% are North American-based. 86% of the companies are cryptocurrency-focused firms and 13% have a banking license or are listed as a bank. As per the survey results, 31% of the firms polled are already adhering to the regulations set by the FATF’s Travel Rule, either completely or partially. 92% of the companies have internal legal and compliance departments and 78% would confidently state that the teams can guarantee that they are acting in accordance within the regulated framework, at both an external and internal level.
Source: Notabene
According to the poll, the key hinderance to companies that have not implemented the Travel Rule protocol into their operations point to the sunrise period and legal uncertainty. 23% of firms point to a lack of technical resources, 9% state that the lack of compliance resources, 7% say that user friction are an obstacle to implementing the Travel Rule. Of the firms that have not yet implemented the Travel Rule into their systems, however only 4% have reported that the regulation is not a focal area in their operations. In terms of ‘readiness to adopt the Travel Rule’, 57% of the companies report that they are in the research phase with 32% of these having allocated a team to the process but not yet begun and 25% having started the research but not yet having a roadmap. 39% are implementing the regulations, with 25% of these having started implementation but are not ready to go live and 25% ready to roll out.
