The transition to conventional finance and cryptocurrencies was deeper than last year. From the maturity of the crypto-first digital trade to the purchase of Big Bitcoin by Microstratgy, it was a year of technological adoption.
With the professionalization of the crypto industry came regulatory challenges. Developed sectors such as decentralized finance (DFI) and peer-to-peer transfers introduced new problems. Although essentially, despite the high-level confusion, both the private and public sectors made progress in developing regulatory frameworks and solutions that would continue to influence the crypto industry for years to come.
This post is part of Coindesk 2020 review year – Compilation of op-aids, articles and interviews related to crypto and beyond. Michael Owen’s CEO CoolbitX, An international blockchain security firm and creator of the FATF Travel Rule solution Signa Bridge.
FATF’s ‘Rules of Travel’
One of the most important gauges for the maturity of the global crypto asset sector this year was the first review of the Financial Action Task Force’s (FATF) proposal 116, or the “Travel Rule” Guidelines for the Crypto Asset Industry in July.
Since its adoption in June 2019, the FATF has conducted a 12-month assessment of regulatory progress to address travel rules by member countries and the private sector, particularly Virtual Resource Service Providers (VASPs) and technology solutions providers. This rule requires VASPs, such as crypto exchange or wallet providers, to collect both the transaction sender and the receiver as well as the previous national ID.
Noting that jurisdictions from every corner of the world map were close to or in effect the Alignment Rules in July, the FATF noted progress and announced a second review in June 2021. Emphasis on emerging sectors as a stable and central bank digital currency (CBDC). , The FATF made it clear that a second review of travel rule implementation is not a sign that it will reduce its focus on the industry.
As innovations and emerging financial products in crypto like DFI – a challenge to effectively control due to their decentralized nature – continue to flood the market, FATF It seems to have admitted Emerging risks need to be monitored and identified. This will be something to look for in the second review coming in July 2021.
Asia is leading the way in adopting crypto
In 2020, Asia continues to lead in cryptocurrency adoption and effective control.
Authorities such as Singapore, South Korea, Japan and Hong Kong have recognized the privilege of being the first mover in crypto rules and have taken the travel rules into account when drafting the regulations.
This year, we have seen the significance of Singapore’s progress as the financial hub of Asia in the regulatory developments of the crypto resource space. The city-state has also exceeded the requirements of the FATF Travel Rules with the Payment Services Act (PSA) enacted this year and has often been praised as an example of a regulation that does not impede the progress of the industry.
See also: Leah Colon-Butler – Inside the Osaka conference where crypto has been serious about FATF’s ‘rules of travel’
As a result, the nation has attracted a larger SWAT featuring VASP Crypto Exchange Such as Hubby, Benance and Many other businesses. Leaked screenshot It has also been observed that big banks and financial institutions like DBS Bank have planned to launch digital asset exchanges pointing to the growing appetite for digital assets and cryptocurrencies among the region’s traditional stakeholders.
In North America, the threshold for the transfer of funds from financial institutions as well as VASPs and the proposed transfer of funds required by the Bank Secrecy Act (BSA) to collect and maintain data on the transmittance of funds will come down to $ 3,000 to 250 250. Although the results of the U.S. election were clear by November, uncertainty remained about the direction of the next administration, neither candidate expressed a firm position on the industry.
Meanwhile, the European Commission has proposed a new framework in the form of its Digital Finance Strategy to regulate cryptocurrencies. Uncertainty such as the ongoing Brexit agreement, centered on the importance of the European market, complicates the European landscape.
Africa and Latin America – the regions with the most pressing use of cryptocurrencies and digital resources – have lagged behind laws when the government adopts a “wait and see” approach to cryptocurrencies. South Africa is an exception after the release of the draft announcement of crypto assets as financial products.
Private sector interdependence
As countries and jurisdictions have made progress in crypto control to varying degrees, the private sector has responded more uniformly to the FATF guidelines. Towards technological solutions, we have seen many working groups, such as the Joint Working Group (JWG), which develops and implements new data standards for data sharing, such as the InterVASP messaging standard, or IVMS 101, and travel. Accelerates implementation and interoperability across solutions that would be welcome for VASPs.
When it comes to meeting the requirements of a travel rule, a number of possible solutions on the market suggest the need to adopt interoperable practices, and larger VASPs may sign up to multiple providers.
As the FATF emphasizes their need for private sector interoperability in July 2020, the trend of corporations and partnerships across solutions and VASPs is likely to move into the second term of the FATF guidelines.
As COVID-19 hit the global economy by reversing market downturns, lockdowns and virtually every nation’s progress, FATF regulators and the crypto industry first reviewed its travel rules guidelines that full implementation is still on the horizon.
With the second review of the FATF in July 2021, we can expect some countries to accelerate their efforts to implement the demarcation rules, although it may be that full alignment may not be reached by this date. Nonetheless, as we expect further progress in implementing interdisciplinary solutions to the private sector that provide better experience for VASPs, we can expect to build their AML strategies in anticipation of more regulatory investigations.