{"id":2599,"date":"2020-01-29T08:00:44","date_gmt":"2020-01-29T08:00:44","guid":{"rendered":"http:\/\/sygna.io\/?p=2599"},"modified":"2020-08-13T00:31:00","modified_gmt":"2020-08-13T00:31:00","slug":"types-of-fatf-r16-crypto-travel-rule-solutions","status":"publish","type":"post","link":"https:\/\/www.sygna.io\/jp\/blog\/types-of-fatf-r16-crypto-travel-rule-solutions\/","title":{"rendered":"What FATF R.16 Crypto Travel Rule Solutions are Currently in the Market?"},"content":{"rendered":"\n

Table of Contents<\/strong><\/p>\n\n\n\n

  1. Introduction<\/a><\/li>
  2. What is expected of an ideal Travel Rule solution?<\/a><\/li>
  3. What is required of an ideal Travel Rule solution?<\/a><\/li>
  4. The 3 types of Travel Rule solutions<\/a><\/li>
  5. How do Alliance Networks, Certificate Authorities and Blockchain-based Protocols differ?<\/a><\/li>
  6. Conclusion<\/a><\/li><\/ol>\n\n\n\n
    <\/div>\n\n\n\n

    1. Introduction<\/h2>\n\n\n\n
    <\/div>\n\n\n\n

    In June 2019, the Financial Action Task Force (FATF)<\/a> issued the Guidance for a Risk-Based Approach to Virtual Assets and Virtual Asset Service Providers<\/a>. <\/p>\n\n\n\n

    To comply with the updated Recommendation 16 on Wire Transfers, their 200+ associated member countries now need to ensure that domestic virtual asset service providers (VASPs) like exchange share beneficiary (recipient) and originator (sender) transmittal information with each other, much like in traditional finance. The deadline? June 2021 (read our new guide on the FATF’s June 2020 review of the Travel Rule and Revised Standards<\/a>)\u00a0<\/p>\n\n\n\n

    \"The<\/figure><\/div>\n\n\n\n

    These disruptive changes delivered a devastating surprise to a cryptocurrency industry largely unprepared for such a strong regulatory response. <\/p>\n\n\n\n

    Up until this point, VASPs hoped that the Know-Your-Customer (KYC) and Know-Your Transaction (KYT) measures they were taking to respectively identify clients and transaction origins would be enough to stave off the authorities a bit longer. <\/p>\n\n\n\n

    Yet, a 2019 report stated that two-thirds of the world\u2019s top 120 VASPs<\/a> had inadequate AML\/KYC systems in place, likely due to the cost and time associated with managing this vital compliance process.<\/p>\n\n\n\n

    With no existing technology or protocol in place (by design) to counter the pseudonymous nature of virtual assets, and the industry severely lacking global standards and strong industry bodies, the race began for innovative enterprises to come up with cost-effective solutions that could connect exchanges and other financial institutions to help them avoid the future wrath of authorities.\u00a0<\/p>\n\n\n\n

    2. What does the FATF expect from Travel Rule Solutions?<\/h2>\n\n\n\n

    The newly updated Recommendation 16<\/a> states that countries should make sure that local VASPs collect required beneficiary and originator information during virtual asset transfers and share it with counterparts and authorities when required. <\/p>\n\n\n\n

    In its June guidance, the FATF made it clear that it was technology-agnostic and had no preference for whether the industry implemented existing or new technologies to help VASPs comply with the new requirements. According to Tom Neylan, senior FATF policy analyst, the task force wanted to establish a level playing field<\/a> that avoided \u201cregulatory arbitrage\u201d and pushed member countries to improve their cryptocurrency policies. <\/p>\n\n\n\n

    \"FATF's<\/figure>\n\n\n\n

    The FATF even name-dropped current technologies<\/a> that could be utilized in Travel Rule solutions, such as:<\/p>\n\n\n\n