U.K. crypto firms have just days to implement the “travel rule” designed to curb money laundering – but patchy implementation of the rule globally is not making it easier for service providers to comply, CoinDesk has been told by industry experts.
Norms set by international standard setter the Financial Action Task Force (FATF), including a requirement for firms to identify the names of people behind transactions, have proved controversial for many in the crypto industry. There have been particular tussles over how to adapt it to crypto’s unique features, such as self-custodied wallets that aren’t hosted by any regulated provider.
Others see it as essential in the fight against dirty money, and to improve crypto’s reputation. With just a total of 35 jurisdictions passing the required legislation, FATF in June described the failure to implement the rule as a “serious concern.”
The requirement to gather data on who their customers interact with overseas also poses a headache for crypto firms. There’s a transitional problem which Ilya Brovin, chief growth officer from Sumsub, a verification platform, described as a “sunrise issue” for the law.
“The fact that somewhere it’s enforced and in other places it’s not enforced.. [so] how do you get players in your jurisdiction where you want to enforce it to be compliant [when] the counterparties they need to deal with are not compliant?” Brovin said, adding that the travel rule will help institutions know which crypto businesses they can trust.
“It’s such a novel area, industry players had a million questions … and I’d say in most places, regulators were kind of really slow to provide guidance,” Brovin said.
The U.K. laws are set to take effect as of Sept. 1, and lobby groups like UK Finance and Claire Cross, partner at law firm Corker Binning, are calling for a standardized approach to the travel rule across jurisdictions.
“A lack of harmonization will result in cracks in the system which can be exploited by those involved in criminal activity,” Cross told CoinDesk. “The FCA is certainly on the right track in implementing the rule, let’s hope the rest of the world is quick to follow.”
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