International bodies representing Virtual Asset Service Providers (VASPs) are faced with a number of new regulatory hurdles – and appear to be racing against time to prepare for industry-wide standardization before regulators next hit another spate of police measures on crypto Stock exchanges and other industry players trigger the year.
Lecture at a panel discussion for industry groups in V20At this summit, which brought together regulators and players in the crypto industry, industry representatives came out in favor of the IVMS (interVASP Messaging Standard) 101, a standard data model that VASPs can use when transmitting the necessary sender and beneficiary information on crypto transactions.
The IVMS 101 was put together in a period of 18 weeks after the first V20 meeting with the regulatory authorities on the edge of the country G20 Osaka summit last year in response to the travel rule, a key Financial Action Task Force (FATF) recommendation that the VASP must adhere to the Anti-Money Laundering / Terrorist Financing Protocols (AML / CFT).
Although the V20 attendees were briefed on some of the available Travel Rule solutions available and welcomed the thought leaders of IVMS 101, the panelists were under no illusion about the scale of the regulatory challenge ahead.
David Riegelig, Head of Risk Management at Swiss bitcoin and the president of OpenVASP Association, warned,
“We need to be aware of the many topics that are not covered by IVMS, such as: [individual VASPs] can deal with errors and how the check works in each case. “
“As great as it is that we have consistent standards, we need to be aware that the crypto industry is fast moving, fast developing and that there are so many different use cases.”
Siân Jones, Senior Partner at XREG advice and one of the main architects of the standardization effort agreed that “a common language and common standards” were required and said that “an IVMS 2, 3 and 4 could soon emerge”, with a number of amendments and enhancements later today – and in the coming months – put up for discussion. “
Crypto industry insiders are already bracing themselves for the worst after the FATF spoke earlier this week of its plans to possibly issue a brand new, updated set of guidelines in June 2021, with peer-to-peer platforms in the spotlight.
“The industry has shown that it can work together in ways it has never done before. […] However, there is a greater need for a single, overarching voice – that will help [the industry] Collaborate with the FATF and other multinational organizations in infinitely more powerful ways. “
But Dave Jevans, the chief executive officer of Encryption track and the chairman of the Alliance to exchange information on travel ruleshad a stronger warning and said:
“In five years we will face others [regulatory] Issues related to non-custody wallets, personal wallets and more – if regulated it will be massive. It will get the job done [recent] Months look like child’s play. “
Andrew Davidson, Head of Architecture & Strategy at Asian Brokerage OSL and the chairman of the Working group for the travel rules protocolAnother industry group of crypto gamblers preparing to comply with travel rules believed that the “biggest challenge” was still the “sunrise problem,” where countries should implement the travel rule months or even years apart .
Davidson added that it was “important to make sure we don’t get too far off the beaten track” by standardizing ourselves as regulations “may change in the future”.
And Malcolm Wright, Chairman of the Advisory Board Global digital finance The standardization group stated that the “next level” of his and the other groups’ work must focus on “how to be operationalized within the timeframe of next June”.
He identified three areas of action, viz
1. A global VASP directory is required in order for the parties to understand whether other VASPs are licensed. what protocols they use. This has to go smoothly for customers. and maybe standardization is necessary here too?
2. A data security standard – What happens to data after it’s been sent from A to B? How do customers know that their data is secure and encrypted? The parties must ensure that the data transfer and storage protocols are equally secure.
3. Improved Screening for Sanctions – This may require best practice guidelines rather than standards.
The V20 summit ends later today.
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