Tracking the Movement of Cryptocurrency

Quite an extensive look at the process and how it must be adapted to make sure monetary regulations are enforced.  And how will this further be be enforced under rules like GDPR and other standards?  Implications for the enforcement of smart contracts?

Inside the Standards Race for Implementing FATF’s  (Financial Activity Task Force) Travel Rule   By Ian Allison in Coindesk

The Takeaway:
- Crypto businesses are figuring out how to comply with the Financial Action Task Force’s “Travel Rule,” where all crypto transactions above a certain amount must be accompanied by identifying information.
- Competing visions for the technical implementation have emerged, though there appears to be general agreement on the need for messaging standards.
- Legal and operational issues will be as challenging as putting technical solutions in place.
- The FATF is set to kick the tires of a range of proposed tech solutions in June 2020.

Imagine SWIFT’s interbank messaging system but for crypto.

Hardcore blockchain libertarians would probably rather not. But firms that deal in cryptocurrency have been asked to abide by the so-called “Travel Rule,” and the clock is ticking.

Although it goes against the grain to shoehorn an identity layer onto a technology specifically designed to be pseudonymous, firms have no choice if they want to abide by the law. The shape and form this will take is something the industry must agree on, and fast.

In June 2019, the Financial Action Task Force (FATF), the global anti-money laundering (AML) watchdog, updated its guidance to explicitly state that virtual asset service providers, or VASPs, must share sender (originator) and receiver (beneficiary) information in cryptocurrency transactions above a certain threshold.  .... "

Seeking Digital Identity

On capability long considered for blockchain was assuring identity.  Just published draft guidance below. 

FATF Releases Guidance on Global Digital IDs as Use Cases Grow  in Coindesk 

The Financial Action Task Force (FATF) wants financial institutions to prepare for the global expansion of digital identification systems.

FATF published its draft guidance on digital identity Thursday, for governments, regulated entities and other stakeholders to enforce anti-money laundering (AML) and counter financing terrorism (CFT) regulations.  (77 page PDF)

The intergovernmental organization aims to address emerging security and transparency issues as the process of financial transactions become more digital, according to the guidance.

On its website, FATF listed a number of questions acting as “areas of focus,” requesting private stakeholders to provide feedback via email by Nov. 29, 2019.

The areas include the specific risks digital ID might pose to AML/CFT enforcement; how it might support financial inclusion; how a system might aid in transaction monitoring; and the potential impact on implementing FATF’s record-keeping requirements.

Notably, the guidance specifically lists distributed ledger technology (DLT) as a tool that can aid in the growth of digital ID networks. A number of blockchain companies have already set their eyes on this particular area, such as Civic.   .... " 

Global Cryptocurrency Regulation Slated to Begin

Had a conversation with a US  Inspector General recently and he expressed how his colleagues were concerned about the use of cryptocurrencies to launder money and related uses, I mentioned that there was work underway to regulate them. Now finally a first step in this direction.  What are the implications for connected technologies?   See also comments in the current MIT Chain Letter.

All Global Crypto Exchanges Must Now Share Customer Data, FATF Rules   By Anna Baydakova , Nikhilesh De ,  in CoinDesk

A powerful intergovernmental organization devoted to combating money laundering and terrorism financing has finalized its recommendations on regulating cryptocurrencies for its 37 member countries.

As expected, the Financial Action Task Force (FATF) standards released Friday include a controversial requirement that “virtual asset service providers” (VASPs), including crypto exchanges, pass information about their customers to one another when transferring funds between firms.

The final recommendation makes official the contentious part of FATF’s February proposal, saying countries should make sure that when crypto businesses send money, they:

“… obtain and hold required and accurate originator [sender] information and required beneficiary [receipient] information and submit the information to beneficiary institutions … if any. Further, countries should ensure that beneficiary institutions … obtain and hold required (not necessarily accurate) originator information and required and accurate beneficiary information …”

Under the new guidance, the required information for each transfer includes:

(i) originator’s name (i.e., the sending customer);
(ii) originator’s account number where such an account is used to process the transaction (e.g., the VA wallet);
(iii) originator’s physical (geographical) address, or national identity number, or customer identification number (i.e., not a transaction number) that uniquely identifies the originator to the ordering institution, or date and place of birth;
(iv) beneficiary’s name; and
(v) beneficiary account number where such an account is used to process the transaction (e.g., the VA wallet).

Calling the “threat of criminal and terrorist misuse of virtual assets” a “serious and urgent” issue, FATF said in a public statement that it will give countries 12 months to adopt the guidelines, with a review set for June 2020.  .... "  (more at link)