FATF Advises Countries to Expedite Crypto ID Checks
- Following the potentially privacy-invading “journey rule” for cryptocurrency transactions, the Financial Action Task Force is focusing on DeFi, NFTs, and unhosted wallets as future global standards.
- Only 11 of the 98 jurisdictions that were assessed are enforcing and monitoring the contentious policy known as the “travel rule.”
- The U.S., U.K., Germany, and China are among the 39 direct members of FATF.
In its report, the FATF said that crypto service providers have been “slow” to adopt the travel rule and that only 11 out of 98 jurisdictions surveyed are currently enforcing it. The organization called on authorities to speed up checks on crypto users’ identities in order to prevent money laundering and terrorist financing.
The travel rule requires financial institutions to collect and share information about the sender and recipient of funds when conducting cross-border transactions. This includes information such as the name, address, and account number of both parties.
Critics of the travel rule say that it is burdensome and intrusive, and argue that it could hamper innovation in the crypto space. Others have pointed out that the measure could be difficult to implement due to the anonymous nature of many cryptocurrencies. However, proponents argue that the benefits outweigh the costs and that compliance is necessary for cryptocurrency businesses to operate in a regulated environment.
In 2018, the FATF issued guidance on how its member countries should regulate cryptocurrencies. The guidance states that crypto service providers must verify the identity of their customers and report any suspicious activity to authorities. This is intended to allow authorities to track illicit funds, just as they do in the conventional financial system. However, many in the cryptocurrency industry have complained that this violates privacy and is poorly designed for payments taking place on a transparent blockchain.
There are a number of ways that crypto service providers can verify the identity of their customers. One common method is to require customers to submit photos of themselves holding their ID documents. Another is to use KYC (Know Your Customer) guidelines, which require providers to gather information about their customers’ identities and backgrounds.
The implementation of these guidelines has been difficult for many crypto service providers, especially those who operate on a global scale. In some cases, governments have been slow to provide clear regulations surrounding cryptocurrencies. This has made it difficult for companies to know how to comply with FATF guidelines without running into legal trouble.