In a recent report, the United Kingdom Virtual Asset Service Providers have been obligated to comply with the newly launched Travel Rule introduced by the Financial Action Task Force (FATF) as from September 1. Furthermore, any crypto-relat3d transaction that does not obey the implemented regulations would be delayed, said the authority.
According to the report, all firms that offer crypto-related products or services in the UK have been mandated to observe the FATF’s Travel Rule, which was implemented in the country on Friday. The Travel regulation reportedly represents international efforts to implement anti-money laundering and also prevent terrorist financing rules to on-chain operations.
Furthermore, the Financial Conduct Authority (FCA) in the UK stated in August that it would implement the Travel Rule in September, requiring VASPs to gather, validate, and share details on local and international transactions. The agency stated that crypto businesses in the country have to comply with the rules anytime they send or receive digital assets transfer from any company in the region or any other country that enforces the Travel Rule.
Additionally, the FCA emphasized that some transaction processes evade the Travel Rule procedures, and such transactions would be delayed if conducted in any jurisdiction that implements the rule. Also, the agency stated that crypto platforms should assemble data in alignment with the anti-money laundering rules from companies operating in jurisdictions without the Travel Rule.
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Crypto Firms Faces Challenges Implementing Travel Rule
In addition, the agency added that should any information be missing in the submitted documents, crypto entities should exercise caution, making a risk-based evaluation before releasing the digital assets to the designated destination.
Jordan Wain, the Chair for UK Public Policy at Chainalysis, reportedly stated that implementing the Travel Rule might prove difficult as firms would have to gather relevant Travel Rule data and create a strategy to delay or impede transactions that do not comply with the standards stated in the rule.
Furthermore, Wain argued that third-party crypto services providers have a crucial role to play in facilitating crypto firms with compliance during each transaction. Also, the FCA statement pointed out that companies have the responsibility of making sure they comply with the Travel Rule whether they are conducting 5he transfer solely or using a third-party’s services.
Aja Heise, the Senior Compliance Officer at XBTO, stated in a report that the Travel Rule is another complicated path of various regulatory requirements that crypto firms have to comply with. Heise expressed his doubts over the possibility of the new rules working out in practice due to the complex technology and development criteria crypto firms need to comply with.
The officer pointed out that for crypto firms to understand their roles and what is required of them, there is a need for better clarity and alignment for crypto regulations globally.
UK To Incorporate Travel Rule Standards In It’s Crypto Rules
Furthermore, Meiran Shtibel, the General Counsel for Fireblocks Associate, argued that the UK is trying to align its crypto regulatory framework with the Travel Rule standards. In July 2022, the country reformed its Anti-money laundering, transfer of Funds, and Terrorist Financing laws to incorporate the new regulations. After approving the law, the country’s lawmakers gave crypto entities one year to adapt to the amendments, which ended on September 1st.
Meanwhile, the FCA released a guide on how crypto entities could adopt the regulation changes to their system on August 17. Regarding the FCA’s directions, Shtibel remarked that they are more flexible than the FATF’s instructions to VASPs. In addition, he stated that the pseudo-anonymity of the cryptosystem is ideal and capable of benefiting the virtual assets space by legalizing it and facilitating more adoption.
According to the report, the FATF reformed its regulations in June 2019 to implement the Travel Rule on crypto exchanges. Furthermore, the agency claimed that the introduced rules helped facilitate accountability, transparency, and more secure crypto asset transfers domestically or across borders.
Nonetheless, the survey FATF executed in 2022 revealed that over 50% of the states in the country had not implemented the Travel Rule, adding that out of 98 States, only 29 had implemented the rules. Among the nations that have adopted the rules included Japan, the US, Singapore, Germany, Canada, Netherlands, Switzerland, Estonia, and South Africa.