Crypto enterprises in the UK are now authorized to suspend specific crypto transactions in order to comply with the recently implemented Travel Rule for cryptocurrencies, effective from September 1.
The regulations, aimed at virtual asset service providers (VASPs), were initially announced by the Financial Conduct Authority on August 17. These regulations mandate UK-based VASPs to “gather, authenticate, and disseminate information” concerning crypto-asset transactions.
In scenarios where an incoming payment is originated from an individual or entity located in a foreign jurisdiction that has not enforced the Travel Rule, the VASP is required to conduct a “risk-based evaluation” to determine “whether to grant access to the cryptoassets for the recipient.” This rule is also applicable for UK residents intending to remit payments internationally. The Travel Rule was formulated by the UN-affiliated Financial Action Task Force (FATF) in June 2019, and the UK initiated its enforcement in July 2022.
The rule is designed to impose Anti-Money Laundering (AML) and Counter-Terrorist Financing (CTF) regulations on on-chain activities.
Other nations that have implemented the Travel Rule encompass the USA, Germany, Japan, Singapore, Switzerland, Canada, South Africa, the Netherlands, and Estonia, as indicated by Sygna.io. On June 23, the FATF criticized its member countries for their inadequate enforcement of the rule, following a survey which disclosed that over half of the countries had not undertaken any measures to enforce the rule.
A survey conducted by the FATF in March 2022 revealed that merely 29 out of 98 jurisdictions had fulfilled the requisite criteria stipulated by the travel rules, and only a fraction of these jurisdictions had initiated enforcement.
Ian Andrews, the Chief Marketing Officer of blockchain forensics platform Chanalysis, elucidated in April 2022 that orchestrating the exchange of information among VASPs across international borders would pose a “considerably challenging issue” to address, at least initially.
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