Stablecoin Issuers Need to Follow the "Travel Rule"

Stablecoin issuers will need to comply with the FATF's AML guidelines
FATF creates third-party guidelines
Crypto transfers would need to include personal information
Crytpo and Bitcoin Market Cap Story of Day

Crytpo and Bitcoin Market Cap Story of Day

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Alt-coins are in the midst of a selective rally with the likes of ATOM, ADA and DOGE up 10%, 15% ,and 30% respectively. Bitcoin, however, remains unchanged as volumes continue to decline. Short-term volatility metrics continue to threaten new lows.


CRYPTO STORY OF THE DAY

Yesterday the Financial Action Task Force (FATF) released a report that essentially stated that stablecoin issuers would have to abide by the same anti-money laundering (AML) policies as stated in its “Travel Rule.” These proposed guidelines are very far away from any form of implementation.

Paris-based FATF describes itself as, “the global money laundering and terrorist financing watchdog.” The organization claims that 200 countries and jurisdictions are, "committed to implementing [their policies]" though officially there are only 32 listed members of the FATF-proper. Interestingly, the Russian Federation, for example, is listed as a member of the FATF and its status has been unchanged regardless of global sanctions against the country. Essentially, the organization is tasked with creating third party-guidelines and it's the job of any jurisdiction that wishes to comply to enact policies around how to do so. In late 2019, the FATF released their first major guidance on crypto of which the focal point was the so-called travel rule. This proposal would imply that exchanges (and some other services such as certain wallets etc...) not only be required to implement know-your customer/AML policies but also include messages, similar to SWIFT, in crypto transfers with personal information about the sender.

We continue to downplay the importance of the FATF guidelines. There are several reasons why these are particularly difficult to execute. First, the organization provides little in terms of suggestions to jurisdictions around technical solutions for its Travel Rule, which is arguably the most difficult part of implementation. Second, there are several significant banking regions that are FATF considers noncompliant. Exchanges and stablecoins with banking in those regions would theoretically see little change to their operations even if the guidelines were to be adopted on a mass scale. Ultimately, until nations outright adopt the guidelines these reports have no application. Even then, there are major questions around implementation.

 

About the Author

FRNT Financial is a technology and sales layer that offers institutional and accredited investors access to various forms of exposure to crypto-assets.