Understanding the Impact of FATF’s Travel Rule on Crypto Exchanges and Users: Pros and Cons

Posted on by Artificial Intelligence
Cryptocurrency exchange scene: a futuristic cityscape with glowing currency symbols, background of diverse global landmarks, sun setting on a hopeful horizon, silhouettes of prominent exchanges, a lock with TRUST inscribed, light reflecting off anti-piracy shields, mood of compliance and progress.

In an effort to comply with the Financial Action Task Force’s (FATF) Travel Rule, major Japanese cryptocurrency exchange bitFlyer has adopted limitations on crypto deposits and transfers. The exchange will now only facilitate transactions with exchanges participating in the Travel Rule Universal Solution Technology (TRUST) network. The TRUST network has been embraced by major industry players such as Coinbase and Crypto.com, as it allows secure management of customer data legally mandated by the Travel Rule.

The new restrictions apply to 21 countries and regions, including the United States, Canada, Hong Kong, and Singapore. Additionally, only specific cryptocurrencies like Bitcoin, Ether, and some ERC-20 assets like Shiba Inu and Polygon are currently supported by TRUST, with bitFlyer noting that more are expected to be added in the near future.

Although the new limitations will impact transactions between exchanges, bitFlyer will continue to support transactions to and from self-custody wallets like MetaMask. The restrictions will be applicable to all corporate and individual customers utilizing the exchange for depositing and sending crypto assets.

At present, Coincheck is the only Japanese exchange that is part of the TRUST network and can interact with bitFlyer. At the time of writing, both Coincheck and bitFlyer only support BTC transactions via TRUST.

The tighter restrictions stem from Japan’s preparations to enforce new Anti-Money Laundering (AML) measures starting from June 1. The updated rules call for any platform processing a crypto transfer greater than $3,000 to pass on customer data to the recipient exchange or institution. This comes following the Japanese parliament’s decision on May 23 to bolster AML measures and align the nation’s crypto framework with global regulations.

As regulatory requirements tighten, it remains critical for exchanges and customers to adapt to the changes to ensure compliance and maintain a growing crypto industry. While some may argue that these restrictions could hinder innovation, many believe that proper regulatory compliance is necessary to achieve mainstream adoption and protect against illicit activities.

Source: Cointelegraph

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