G20 attendees may be returning home from their trips to Osaka, Japan, but crypto executives while there were also successful in that their hastily arranged “V20 Summit”. It was successful in creating a platform and focal point for discussions with government officials and regulators going forward. The well-attended conference had speakers from both sides of the crypto aisle, who addressed implementation issues with the new virtual asset guidelines proposed by the Financial Action Task Force (FATF).
As we recently reported:
The focus of the debate will be on this proposal: “Global regulators [are] to ensure that “virtual asset service providers” [VASPs] – exchanges, custodian banks and others involved in the crypto markets – collect, hold and remit information on the counterparties to customers’ trades executed on their platforms, and make this available to law enforcement”.
More specifically, the area of disagreement revolves around Recommendation 16 of the FATF report, which mirrors what is known as the “Travel Rule” in the U.S. It requires that VASPs and “[all companies are] to collect information about customers initiating transactions of over $1,000 or 1,000 euros, as well as details about the recipients of the funds, and to send that data to the recipient’s service provider along with each transaction.” Although the Travel Rule is common in worldwide banking regulations, it does not translate well to the capabilities of blockchain related transactions.
Ronald M. Tucker, the founder of the Australian Digital Commerce Association (ADCA), and the V20 group announced that:
A group of national trade associations representing virtual asset service providers (VASPs) signed a Memorandum of Understanding (MOU) to establish an association to provide a global unified voice for the virtual asset industry. We’ve brought everyone on the journey to create a new body that will assist in establishing a means to engage with government agencies and the FATF to ensure our best interests are understood and valued at an international level.
Tucker went on to speak to a long-term commitment:
The agreement signals a commitment to develop a cooperative regime to underpin dialogue with government and regulators to promote VASP. In addition to supporting industry-wide information exchange and best practice and an increased awareness of the industry and its economic value, it promotes and facilitates compliance with global industry standards.
As reported, the signatories included the ADCA, Singapore Cryptocurrency and Blockchain Industry Association (ACCESS), Japan Blockchain Association (JBA), Korean Blockchain Association (KBCA), Hong Kong Blockchain Association (HKBA) and Taiwan Parliamentary Coalition for Blockchain & Industry Self-Regulatory Organization. A former FATF president, Roger Wilkins AO, witnessed the signing ceremony.
Attendees at the V20 Summit were diverse and included major crypto exchanges, media outlets, law firms, and other crypto service providers: Bitfinex, Circle, Coinbase, Huobi, Kraken, Okcoin, Coins.ph, B2c2, Bitcoin.com, Bitcoin Australia, Crypto Garage, Deloitte, Diginex, Norton Rose Fulbright, Sentinel Protocol, Anderson Mori & Tomotsune, and PWC. Several regulated crypto exchange operators in Japan also participated such as Bitflyer, Bitpoint, Coincheck, Huobi, Rakuten Wallet, and SBI Group.
Daniel Kelman, Bitcoin.com’s resident legal advisor, was one of the speakers, who noted:
Most importantly, it was clear FATF did not know much about our industry and were just forcing bank rules cookie-cutter style onto crypto. Case in point was my discussion about using the public ledger to assess risk as opposed to the ‘Travel Rule,’ which is basically impossible for crypto exchanges to implement. I raised the prospect of blockchain analysis to achieve the same result and they were dumbfounded, had never even considered this.
It is noteworthy that there were speakers representing FATF proposals, as well as the crypto industry. While differences were noted, and areas of disagreement revealed, the session was the first step towards agreement on mutual goals for the betterment of the industry and for greater awareness and accommodation by the regulatory community. While the FATF “makes recommendations, not laws,” it is important that the crypto industry embrace the goal of working with the group and complying with new rules.
Huobi Global CEO Livio Weng concluded:
While it’s true these changes do present a challenge to the industry in terms of immediate implementation, they present real opportunities as well. This is a chance for us to develop industry standards to promote growth and protect user rights, develop technology to identify and weed out the bad while preserving the access for legitimate users, and to develop our ability to respond as a community to the issues that the cryptocurrency and blockchain industries face.