New FATF guidelines require professional crypto consultation

[alexcopper]

I didn't realize the FATF rule is set into place requiring all exchanges to follow foot. Cybersecurity companies like Ciphertrace are stepping up to help advise on the proper steps to take and even going so far as to implement other AML steps.

Pretty sure this is the first regulation to be taken seriously. Granted it has to do with all countries not just the united states


https://www.cryptopolitan.com/fatf-guidelines-promote-crypto-consultation/?utm_content=100296874&utm_medium=social&utm_source=twitter&hss_channel=tw-3972254294

[akeegan]

that's a tough one to get around. Makes sense why Ciphertrace would step in. This is a wild west with regs

[squatter]

I didn't realize the FATF rule is set into place requiring all exchanges to follow foot. Cybersecurity companies like Ciphertrace are stepping up to help advise on the proper steps to take and even going so far as to implement other AML steps.

Pretty sure this is the first regulation to be taken seriously. Granted it has to do with all countries not just the united states

The FATF is a front for the US, and how seriously the travel rule will be taken remains to be seen. Globally, compliance with FATF rules is not total or widespread.

No major government has actually passed any laws complying with the travel rule yet, and only one country has done anything so far -- Lithuania. The US and squeaky clean services like Gemini and Bitpay will comply, but it'll be interesting to see what the rest of the world does.

[Kemarit]

As far as I know it was just a recommendation, so it's not binding per se. However, member countries can implement this guidelines across as this is a international cooperation between countries, so their is implications to us, crypto enthusiast because it will really go against the basic tenets of crypto - decentralization and (psuedo) anonymity. In practice though, it could be good as crypto is really changing very fast and government around the world need to put  regulatory framework so that we won't see abuse here.

[malevolent]

The US and squeaky clean services like Gemini and Bitpay will comply, but it'll be interesting to see what the rest of the world does.

If they do, that will push other companies to comply too, to be able to do business with those that do comply.

[squatter]

The US and squeaky clean services like Gemini and Bitpay will comply, but it'll be interesting to see what the rest of the world does.

If they do, that will push other companies to comply too, to be able to do business with those that do comply.

Definitely, but there is still a huge demand for KYC-free services. You can tell as much by the way Binance operates: They are willing to segregate their markets rather than go fully compliant. It's also basically a given that a host of countries won't be complying with the FATF travel rule, leaving the door open to non-compliant exchanges.

And that's where things get interesting. Are the Coinbases and Geminis and Bitpays of the world going to blacklist outputs from exchanges like Binance? Bitmex? Smaller altcoin and derivatives exchanges?

[malevolent]

Definitely, but there is still a huge demand for KYC-free services. You can tell as much by the way Binance operates: They are willing to segregate their markets rather than go fully compliant. It's also basically a given that a host of countries won't be complying with the FATF travel rule, leaving the door open to non-compliant exchanges.

And that's where things get interesting. Are the Coinbases and Geminis and Bitpays of the world going to blacklist outputs from exchanges like Binance? Bitmex? Smaller altcoin and derivatives exchanges?

Sure, a major reason why Binance has a large market share among BTC/altcoin exchanges is them having lax KYC requirements. But there's a reason why more and more places are forcing their users to go through increasingly onerous KYC. Same might happen with the travel rule, some exchanges have been asking a lot of instrusive questions about the provenance of peoples' coins for a while now. Binance is already asking for KYC to participate in IEOs and for margin trading...

[avikz]

The US and squeaky clean services like Gemini and Bitpay will comply, but it'll be interesting to see what the rest of the world does.

If they do, that will push other companies to comply too, to be able to do business with those that do comply.

Definitely, but there is still a huge demand for KYC-free services. You can tell as much by the way Binance operates: They are willing to segregate their markets rather than go fully compliant. It's also basically a given that a host of countries won't be complying with the FATF travel rule, leaving the door open to non-compliant exchanges.

And that's where things get interesting. Are the Coinbases and Geminis and Bitpays of the world going to blacklist outputs from exchanges like Binance? Bitmex? Smaller altcoin and derivatives exchanges?

Binance is probably thinking about the future and keeping themselves ready for it. However, we all know as a matter of fact that FATF guidelines are taken very seriously worldwide. So I don't think it will be possible for any exchange to have two separate regulations guiding their operations. They will have only two choices in future, either they will comply with the local law which will be formed as per the recommendations given by FATF or they will go out of business or forcefully closed by the governing country.

Since cryptos have no border limitations, a global standard operating procedure has to be created and adopted by every country for crypto transactions. The entire matter is at a very nascent stage right now but slowly taking shape! There will be no space for Coinbase or any other exchange to follow different type of guidelines. All will have to comply with the global standard.

[Harlot]

With all the partnerships and required services being ordered for crypto exchanges I just hope that it doesn't blow back to us clients in terms of raising the fees for their services. The FATF simply ordered the exchanges to spend more money on top of their normal operations, we are lucky that we tasted a little bit of bullish market that is why we are not seeing exchange cost cutting as of the moment but as soon as we see another bear market we can expect that we will also see a rise of fees soon with the additional expense they will incur.

[figmentofmyass]

With all the partnerships and required services being ordered for crypto exchanges I just hope that it doesn't blow back to us clients in terms of raising the fees for their services. The FATF simply ordered the exchanges to spend more money on top of their normal operations

coinbase and gemini both raised their fees recently. kraken said in january that subpoenas from regulators/law enforcement agencies had tripled year over year and that responding to them is quite burdensome. i'm sure that has something to do with it.

this trend of rising fees will probably continue given how onerous the FATF requirements are.

[BitHodler]

Since cryptos have no border limitations, a global standard operating procedure has to be created and adopted by every country for crypto transactions. The entire matter is at a very nascent stage right now but slowly taking shape! There will be no space for Coinbase or any other exchange to follow different type of guidelines. All will have to comply with the global standard.

That's a pretty scary forecast but nothing too surprising with how we have seen the banking system adopt similar measures before Bitcoin even existed, and they aren't done yet with how governments demand more of them year after year.

Technically speaking, any service dealing with 'physical' crypto currencies is a financial institution by nature, and for that reason they are and will be treated as such. Nothing that can be done about it unfortunately.

The great thing about Bitcoin is that you can use it without asking for permission if you avoid centralized services. With fiat digitally that is not possible at all. They have built a framework meant to trap people in and turn them into their slaves.

[squatter]

Definitely, but there is still a huge demand for KYC-free services. You can tell as much by the way Binance operates: They are willing to segregate their markets rather than go fully compliant. It's also basically a given that a host of countries won't be complying with the FATF travel rule, leaving the door open to non-compliant exchanges.

I don't think it will be possible for any exchange to have two separate regulations guiding their operations. They will have only two choices in future, either they will comply with the local law which will be formed as per the recommendations given by FATF or they will go out of business or forcefully closed by the governing country.

It's a lot more complicated than that. People are overestimating the effectiveness of the FATF. Some of the countries where exchanges are registered today -- like Seychelles -- are already not compliant with FATF rules. The notion of Seychelles implementing the Travel Rule anytime this decade is a joke. There are dozens and dozens of countries like this:

FATF rules aren't accepted all around the world. Even within the EU some countries do not participate in this "project" so it's not the end of the world yet.

Very true. I was initially under the impression that compliance was pretty widespread. It's the opposite really. Many dozens of monitored countries fail to implement the majority of FATF rules. This is decades after these standards were initially put in place. Often times, a mere pledge by a country to work towards implementing some of the standards is enough to stave off FATF pressure for years.

The elephant in the room is how many problems this will create for users of non-compliant services. If BitMEX refuses to comply -- especially because Seychelles is unlikely to pass related laws anytime soon -- will BitMEX users have problems cashing their bitcoins out at exchanges like Coinbase?

[malevolent]

Definitely, but there is still a huge demand for KYC-free services. You can tell as much by the way Binance operates: They are willing to segregate their markets rather than go fully compliant. It's also basically a given that a host of countries won't be complying with the FATF travel rule, leaving the door open to non-compliant exchanges.

And that's where things get interesting. Are the Coinbases and Geminis and Bitpays of the world going to blacklist outputs from exchanges like Binance? Bitmex? Smaller altcoin and derivatives exchanges?

If what coindesk reports is true, Binance is considering on using CipherTrace software to implement FATF's travel rule. Perhaps they'll use it for Binance.us customers and some other exchanges will follow, and we'll see emergence of two non-interacting Bitcoin currencies in circulation.

[squatter]

Definitely, but there is still a huge demand for KYC-free services. You can tell as much by the way Binance operates: They are willing to segregate their markets rather than go fully compliant. It's also basically a given that a host of countries won't be complying with the FATF travel rule, leaving the door open to non-compliant exchanges.

And that's where things get interesting. Are the Coinbases and Geminis and Bitpays of the world going to blacklist outputs from exchanges like Binance? Bitmex? Smaller altcoin and derivatives exchanges?

If what coindesk reports is true, Binance is considering on using CipherTrace software to implement FATF's travel rule. Perhaps they'll use it for Binance.us customers and some other exchanges will follow, and we'll see emergence of two non-interacting Bitcoin currencies in circulation.

Sounds tragic for fungibility. Maybe that's the point.

Maybe this will provide the impetus for larger scale adoption of P2P trading. Growing fears about frozen funds and customer due diligence demands by exchanges could drive traders towards Bisq and similar decentralized alternatives, which appear to have escaped FINCEN regulation.

[malevolent]

Maybe this will provide the impetus for larger scale adoption of P2P trading. Growing fears about frozen funds and customer due diligence demands by exchanges could drive traders towards Bisq and similar decentralized alternatives, which appear to have escaped FINCEN regulation.

That would be ideal, yes, but if things like the travel rule become entrenched and enforced in the ecosystem, decentralized alternatives will never grow if people can't feasibly use their bitcoins, either because they can't spend them outside of DNMs or because they can't sell them, or because can't sell them for as much as they trade on most exchanges.

[Tylev]

As far as I know it was just a recommendation, so it's not binding per se. However, member countries can implement this guidelines across as this is a international cooperation between countries, so their is implications to us, crypto enthusiast because it will really go against the basic tenets of crypto - decentralization and (psuedo) anonymity. In practice though, it could be good as crypto is really changing very fast and government around the world need to put  regulatory framework so that we won't see abuse here.

They are called recommendations only, but are binding on participating countries under the threat of large fines. So, the FATF recommendations of June 21 should be introduced into all national laws of the participating states exactly one year later, by June 21 of the next year, otherwise penalties will follow.

[leea-1334]

Is it really true that Ciphertrace will be responsible for helping to set this up? I do not think it is true. They would help maybe but they cannot be the ones doing it all and taking the lead can they? Does not make sense a private company is doing this for such an organization. Maybe I do not understand how it works.

[Linkkoin]

That would be ideal, yes, but if things like the travel rule become entrenched and enforced in the ecosystem, decentralized alternatives will never grow if people can't feasibly use their bitcoins, either because they can't spend them outside of DNMs or because they can't sell them, or because can't sell them for as much as they trade on most exchanges.

There is another issue related, as FATF is aiming in making the crypto environment as close to the banking system as possible.
 We can check the history of each wallet or block number. Imagine you became an owner of the part of the block which had been related at some point in some sort of illegal activity. In the eyes of some officials, it would make you somehow involved in an investigation related to the money laundering and your wallet can be frozen (depending on the local legislation) for months if not years. Not to mention that in some jurisdictions it can be even enough for arresting you. Even if you just eg. accepted payment in BTC for your used mobile.

[figmentofmyass]

Is it really true that Ciphertrace will be responsible for helping to set this up? I do not think it is true. They would help maybe but they cannot be the ones doing it all and taking the lead can they? Does not make sense a private company is doing this for such an organization. Maybe I do not understand how it works.

ciphertrace isn't regulating or enforcing anything.

this is what's happening: the FATF travel rule---if governments pass it as law---will require exchanges to obtain KYC about account holders and also KYC about the recipient of external withdrawals. so ciphertrace is creating a software for crypto services so they can confidentially verify that the service sending a transaction has completed the extended KYC demanded by the travel rule.

this model won't necessitate constantly sending KYC data back and forth between services, which is the problem ciphertrace is trying to solve.

[Theb]

There is another issue related, as FATF is aiming in making the crypto environment as close to the banking system as possible.
 We can check the history of each wallet or block number. Imagine you became an owner of the part of the block which had been related at some point in some sort of illegal activity. In the eyes of some officials, it would make you somehow involved in an investigation related to the money laundering and your wallet can be frozen (depending on the local legislation) for months if not years. Not to mention that in some jurisdictions it can be even enough for arresting you. Even if you just eg. accepted payment in BTC for your used mobile.

Doubt that they'll be looking the "illegal activity" on a block by block basis since there is still a lot of transactions included in it. If they know how Blocks work then they know that some legit transactions that are not involved with a crime might just be coincidentally included in it, this will be more obvious if they have seen the pattern from it. Also they will see the difference in addresses used in these transactions it would be easy for them to pinpoint the affected addresses involved with the illicit activities and who they are sending it to. But if all else fails and your tx id is involved with the investigation then it is your chance to prove on where did you receive that BTC from receipts, messages, and any proof that its a legit transaction would be enough to clear your name.