Everything you need to know about Travel Rule

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Unlike traditional financial system transactions having tagged with a bank account or name, cryptocurrency transaction records are hashed whenever it transacts between 2 wallet addresses which effectively preserves the privacy of both parties. Hence, concerns were raised with the potential for illicit use cases with cryptocurrency due to its anonymous nature.

As cryptocurrency becomes more popular, the need for Anti Money Laundering and Counter Financing Terrorism (AML-CFT) measures becomes highly essential.

What is the FATF Travel Rule?

The Financial Action Task Force (FATF), is an international organization that spearheads AML-CFT efforts on a global scale, ensuring implementation of legal, regulatory, and operational measures.

The Travel Rule was introduced by TAFT which will impact Virtual Asset Service Providers (VASPs) and the cryptocurrency industry in general. Essentially, it is an initiative that requires financial institutions to share information about their customers and assume the responsibility to report suspicious activities.

In this case, VASPs are now required to disclose customer information when facilitating a transfer of cryptocurrencies of 1,000 USD or higher. The requested information covers both the sender’s and recipient’s name, geographical address, and account details.

The Travel Rule will only be applied to VASPs, such as cryptocurrency exchanges (Tokenize Xchange), and will not affect individuals who choose to transact in cryptocurrencies.

Moving forward

The Travel Rule may also pose potential challenges for VASPs, as user’s privacy may be compromised and users of these exchanges may experience difficulties when transferring cryptocurrencies.

However, users will still be able to send and receive cryptocurrencies to their private wallets, and there will be a process for customers to verify ownership of their private wallets.

Singapore has always been a keen adopter of the FATF recommendations. The country enacted the Payment Services Act (PSA) in January 2019, clearly defined actions that crypto businesses needed to take. The PSA requires digital payment token services (which includes both crypto businesses and exchanges) to comply with the FATF rules. In compliance with the Travel Rule, Singapore’s reporting threshold is around $1,000 (SG $1,500).

Despite the shortcomings, such regulations will definitely shift the perception of digital assets and cryptocurrencies into a positive light.

How will this affect Tokenize?

The team has already ramped up efforts to conduct necessary due diligence and ensure compliance with requirements set forth by the PSA as well as the Travel Rule.

Although mass regulatory frameworks are still in development, the team pledge to adhere to all necessary compliance as well as to provide all our users a complete all-rounder crypto eco-system to trade, finance and spend their crypto.

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