Japan crypto exchanges to implement FATF travel rule next month
All crypto exchanges in Japan will adopt the Financial Action Task Force’s (FATF) travel rule on 1 April – a move that implies most of East Asia’s largest trading platforms will begin to accept the controversial protocol before laws even require them to do so.
Travel rules essentially expect platforms to stamp anonymity in crypto transactions to fight money laundering. At its essence, the rule attempts to create a web of data sharing whereby both senders and recipients of all crypto asset transfers exchange identifying information, flag transactions that appear suspicious, identify when they take place if seen outside, and inform the regulators.
The FATF has urged the international community to incorporate the travel rule into national law as soon as possible. But East Asian trading platforms – which are among the most tightly regulated exchanges in the world – are eager to show that they are eligible for compliance even without valid prompts.
Hedge Guide reported that the Japanese Virtual Currency Exchange Association (JVCEA), a self-regulating body that includes all licensed Japanese crypto exchanges as top-tier members, and various main companies are awaiting licenses as second-tier members were reacting to a call from the regulatory Financial Services Agency (FSA).
The FSA requested last year that JVCEA members create a plan for travel rule compliance and the latter has responded with a two-stage response.
As of April 1, the following data will be required with all crypto transactions made through exchanges in Japan:
1.The Recipient Name.
2. Data on the origin of the transaction (and whether or not the transaction originated from an exchange).
3. Data on the recipient’s address, and information about whether or not the recipient’s wallet is hosted on the exchange.
In the second phase, to come into place on October 1, further details about the recipient will also need to be provided, as well as information about the “purpose of the transaction”, although the same details “are still to be marked”.
Additional information will also be required for anyone conducting transactions over US$865.
As reported, South Korea’s major crypto exchanges are either cooperating in joint travel rule compliance efforts or pioneering their model, months before the promulgation of a law that compels them to do so.
Furthermore, in February, a group of major crypto companies such as Anchorage, Bitgo, BlockFi, Circle, Coinbase, Gemini, Kraken, and more announced the launch of Travel Rule Universal Solution Technology (Trust), a solution designed to accept a requirement known as the Travel Rule while conserving the security and privacy of their customers, they said. The solution already comprises well-known members in the industry within the US, while the global development will follow “soon”.