What is Crypto Travel Rule 101?

In 2019, the Financial Task Force (FATF) issued the Cryptocurrency Travel guidance, which was formerly penned down as recommendation #16. The main objective behind introducing the rule was to bring all the FATF countries under policy-making that looked after the money-laundering concerns using Bitcoin 360 AI.

The travel rule initiated one comprehensive way for the organization to come forward and demand access to all the transaction-related data. In the initial phase, the rules were secured for the banks to follow; however, FATF had the ambition to secure the concerns regarding crypto, and considering that, it was decided to expand the rules among all the crypto companies. 

Following the issuance of the rule, the G20 applied the travel rule to their laws; however, it has been three years, and virtual asset providers are still facing enormous challenges in becoming compliant with these laws.

In this article, we will discuss more crypto travel rules, so keep reading.

More about Travel Rule 101

The FATF’s crypto rule was merely to share the flow of information. Through this rule, VASPs are bound to share the information of transactions that cross a certain limit. Furthermore, the rule requires VASPs to reveal identity information if the transaction exceeds $1000.

For instance, if party A sends party B some cryptos, the service at the receiver end may ask for the sender’s identity during the transaction. The same procedure applies when a sender asks for information from a recipient. Additionally, network participants have the ability to intervene and use versions while the transaction process is in progress.

In the United States of America, the crypto travel rule is only applicable when the transaction exceeds the benchmark of $3000. This means that if party A transfers party B cryptocurrency valued at more than $3,000, the service providers on both ends are authorized to share transaction information, such as sender and receiver information, date, value, etc.

Switzerland, on the other hand, is one of the nations that has established rigorous guidelines and limitations for cryptocurrencies. The state has used travel regulations to direct the regulators to supply providers with proof of using private wallet information. Following that, the FATF recommended that the providers be informed of the sender and receiver’s names, addresses, and account details.

The initial goal of the FATF’s travel regulation was to combat money laundering by focusing on banks and other financial institutions. However, it was also applied to the cryptocurrency space after the 21019 recommendations.

The importance of the Crypto Travel Rule

The following are some of the factors that signify why the crypto travel rule is important:

• This rule’s primary goal was to prevent money laundering.
• The rule increases transparency in the cryptocurrency industry.
• The ability to collect transaction details may be granted to law enforcement agencies upon introducing the rule.
• The regulation obliges cryptocurrency startups and businesses to adhere to the sanctions.
• This regulation makes it possible to govern cryptocurrencies more uniformly.
• The crypto rule integrates the financial and cryptocurrency markets.

Disadvantages of Crypto Travel Rule

Information privacy is one of the main drawbacks of crypto travel regulations, as the law may cause uncertainty and further damage the industry.

The FATF crypto rule might not be compatible with the anonymity-focused crypto created.

Every country may have distinct travel regulations because the restrictions may vary depending on the country.

The expense of compliance is the last factor, and it will cause the market to contract even more.

Be Aware of the Crypto Travel Rule

In recent years, cryptocurrency has advanced. People who used to trade coins on the Bitcoin Trading Platform are ready to launch their own virtual currency, but it’s important to be aware of the crypto travel rules.

If you have read this article at the time you are considering investing in the cryptocurrency market, then your presumption is correct. One of the things you might have to do before entering the market is compromise on information confidentiality. All the aspects must be kept in mind because they all have the potential to increase uncertainty and decrease value.

Conclusion

The main reason for introducing the FATF rule is to prevent money laundering and bind the crypto space to the financial market. Moreover, the rule intends to expound on sharing information with financial institutions and bodies.