by Angus Brown member of the TSC and sponsor of the ‘Travel Rule’ standard
The Technical Standards Committee of the BSV Bitcoin Association is dedicated to a rigorous process of facilitating technical standards for BitcoinSV. Several standards have been published since the inception of the body, one of which is the ‘Travel Rule’ standard.
The ‘Travel Rule’ is the colloquial name given to a set of recommendations by the Financial Action Task Force. FAFT is the inter-governmental body guiding banks and regulators fighting money-laundering and terrorist financing. These recommendations are interpreted into laws and regulations that banks use to screen customers and transactions. We experience these as ‘Know-Your-Customer’ (KYC) requirements to provide identity and various supporting documents when opening accounts with financial institutions.
In 2019 FAFT explicitly extended these requirements to firms providing cryptocurrency services, which have traditionally not been subject to regulatory oversight. Businesses such as crypto exchanges, wallets and token issuers will need to adhere to the rules published by their local regulators, or face enforcement actions.
The TSC conducted a survey in May 2022 to test attitudes towards the ‘Travel Rule’. The survey participants were a variety of firms providing crypto-asset services, across the globe. A conclusion from the survey were that half the respondents think the ‘Travel Rule’ requirement is not imminent, as not all regulators have promulgated these rules.
It was striking that 80% of the respondent think that the ‘Travel Rule’ will indeed apply to their business, although 25% believe that no changes will be needed. Of those planning to make changes, most will use in-house resources. Support for a commercial vendor providing a solution is very low (<5%), with strong support (>80% of those making changes) for an industry standard.
In some countries lower-value transactions (below a threshold of around $1000) are subject to simpler requirements. It appears that most respondents believe that most of their transactions will be below this $1000 threshold. However there is significant confusion as to the requirements below that threshold – an issue which local regulators need to provide clarity on.
In conclusion, a quarter of respondents believe there will be a major impact on customers, and 55% believe there will be a negative impact on their business. It will become an increasingly serious issue for businesses providing crypto-asset services to address in the coming months.
