Towards the end of June, the Financial Action Task Force (FATF) announced a set of rather controversial and tough KYC and AML regulations that it wants every cryptocurrency project and crypto exchange to adopt. However, not all entities are going to adopt the new regulations as they are only advisory – for now at least. To meet the FATF half way, CipherTrace and Shyft have joined forces to develop a cryptographic data encryption service that will allow trades, exchanges and transactions remain private and anonymous, with the FATF being able to access the data using their unique private keys.
Bypassing the “Travel Rule”
In the regulation announcement, the FATF included a section dubbed the Travel Rule. Under this rule, every transaction and trade that was valued at over $1,000 would need to be shared between every crypto exchange on the planet. Now, this would severely compromise the privacy of crypto users and traders, with many crypto users not wanting their data to be shared with certain exchanges. The proposed cryptographic data encryption service will allow exchanges to share this data securely using Proof of Knowledge without disclosing personally identifying information.
A Possible GDPR Headache
Without this secure Proof of Knowledge system from CipherTrace and Shyft, exchanges could get their hands on the data and use this to start bombarding you with marketing emails that you didn’t consent to. While this will only apply to European crypto traders, there is a chance for GDPR regulations to be breached – especially if the data gets into the wrong hands.
Ripple Signing Up to FATF Regulations
Without even thinking twice, Ripple signed up to the new FATF regulations almost instantly. This means every XRP address will be subjected to a risk assessment from the FATF to ensure there is no shady dealings going on from that address. Each address will be given a score from 1-10 and all exchanges will be aware of the score attached to that specific address. Exchanges can then choose to accept or decline incoming transactions based on the risk assessment score.
Earlier this week, the G20 gave the FATF regulations the green light to go live, meaning exchanges can start signing up right away. This is a worrying move for the crypto community as it could waive our right to privacy and anonymity. The data being provided to exchanges could be abused significantly, so controls and checks need to be put in place to ensure there are no negative outcomes from these new regulations.