Updated: And I thought KYC was Bad, Travel Rule Countdown Begins

[wry]

Have you been enjoying the nice uptick in BTC prices?  I sure have.  I keep thinking we are on the edge of popular acceptance and then something like this story crosses the news wires and I get really sad.

At this point, almost everyone in the developed world has heard of Know Your Customer (KYC) requirements that banks have.  It's a form of control, justified, like so many of them are, in the name of law enforcement against really bad actors.  Many large exchanges, such as Coinbase and Poloniex, require you to authenticate your identity before you can trade on their platform - that is if you are even from a country they are willing to serve.

Now normally no big deal, but one of the big advantages of crypto is its privacy features.  After all, one of its charms was that Bitcoin basically brings numbered Swiss bank accounts to the masses.  Alas, this is not good for financial regulators.

The latest set of proposed regulations from the Financial Action Task Force (I am not making that up) is going to go beyond KYC to impose the "travel rule" on crypto exchanges and service providers.  The travel rule was first proposed for US banks back in 1995 and finally adopted in 2004 and states that banks must track not only who deposits money but the origins of that money.  

Of course, for many crypto transactions we have no idea who the originator is, it's just an address.  So the crypto industry was out in force to try and stop or slow down these regulations.  However, based on the article, it does not look like they are going to be very successful.

So far, the only good news I can find, is that the travel rule only applies to amounts of 3000 USD and above, so many sends might not be effect, but it is still a concern for the crypto ecosystem.  While I don't do many transactions (or really any transactions) for more than that, I'm sad that it will soon be a hassle for anyone to do so.

Link:  https://www.coindesk.com/beyond-kyc-global-regulators-appear-set-to-adopt-tough-new-rules-for-crypto-exchanges

If you want the details on the travel rule:  https://www.sec.gov/about/offices/ocie/aml2007/fincen-advissu7.pdf

[williamshennie9]

I get increasing worried when I read things like this. Crypto is supposed to be decentralised, not something whereby we have to provide all our details to be able to hold money in an exchange/wallet etc. I know this case is only $3,000 and up, but as crypto becomes more widespread, this amount will probably decrease, and then it will effectively be centralised

[cryptonesiac]

It can never be done... it's the old industries trying to control the new ones. They'll fail eventually

[barbaris]

Yes, KYC require already many resources, but not everyone likes it. I think data collection is carried out for something else.

[rajamishra]

hello friends its true all are worried but some time its required in my way of thinking due to hacked issue and also unauthorised login by unknown IPs ,may be for this reason they think about those securities.hope may be in future they try to create some crypto banks likewise. and also parallelly operate like other currency banks worldwide.now a days crypto users rapidly grow day by day.

[polor12]

that's that one of the main reason that people going to crypto correct the anonymous aspects of it. to me once they restrict that..they would have full control. right..

[coeghacked]

before kyc you must think  = Do With Your Own Risk  

[nuuuitsjdragon]

On 5/21/2019 at 1:18 AM, wry said:

Have you been enjoying the nice uptick in BTC prices?  I sure have.  I keep thinking we are on the edge of popular acceptance and then something like this story crosses the news wires and I get really sad.

At this point, almost everyone in the developed world has heard of Know Your Customer (KYC) requirements that banks have.  It's a form of control, justified, like so many of them are, in the name of law enforcement against really bad actors.  Many large exchanges, such as Coinbase and Poloniex, require you to authenticate your identity before you can trade on their platform - that is if you are even from a country they are willing to serve.

Now normally no big deal, but one of the big advantages of crypto is its privacy features.  After all, one of its charms was that Bitcoin basically brings numbered Swiss bank accounts to the masses.  Alas, this is not good for financial regulators.

The latest set of proposed regulations from the Financial Action Task Force (I am not making that up) is going to go beyond KYC to impose the "travel rule" on crypto exchanges and service providers.  The travel rule was first proposed for US banks back in 1995 and finally adopted in 2004 and states that banks must track not only who deposits money but the origins of that money.  

Of course, for many crypto transactions we have no idea who the originator is, it's just an address.  So the crypto industry was out in force to try and stop or slow down these regulations.  However, based on the article, it does not look like they are going to be very successful.

So far, the only good news I can find, is that the travel rule only applies to amounts of 3000 USD and above, so many sends might not be effect, but it is still a concern for the crypto ecosystem.  While I don't do many transactions (or really any transactions) for more than that, I'm sad that it will soon be a hassle for anyone to do so.

Link:  https://www.coindesk.com/beyond-kyc-global-regulators-appear-set-to-adopt-tough-new-rules-for-crypto-exchanges

If you want the details on the travel rule:  https://www.sec.gov/about/offices/ocie/aml2007/fincen-advissu7.pdf

This is bad news, very bad news indeed.

Although having this implementation > regulation which in turn bolsters support from the mainstream crowd, the increased usage definitely will increase value. 

However, too much regulation decreases the privacy and decentralisation of Cryptocurrency, which is in itself one of the main advantages. 

Eventually, if this goes on for too long Cryptocurrency will just be an alternative currency similar to foreign currency... oh well I guess we will have to see what happens.

[Etude]

I hope such things as these will never ever successfully get imposed as it will only cripple the wonder which is cryptocurrency and Bitcoin!

[Kate]

The thing is KYC is fine to provide in my opinion but not information like very inportant ones maybe ones like driver licences or something , nowadays they have increased the security on KYC so you can't  easily pass kyc.

[Shaniqua]

so do  i understand this right?...  lets say you withdraw to coinbase 5000 dollars in btc... and withdraw that to your bank directly, they will ask coinbase where the money came from?

[wry]

In an important UPDATE to this story, the G20 released a communique that they will all support the restrictive rules on exchanges known as the travel rule.  This is really really bad for privacy.  No word yet on exactly when this will take effect for most major developed countries, but it looks like it's going to happen.

Link:  https://www.coindesk.com/g20-reaffirms-it-will-apply-expected-tough-new-fatf-rules-on-crypto

[wry]

UPDATE:  There is a good summary and discussion of what this exactly means posted here:

https://www.coindesk.com/its-fatfs-way-or-the-highway-for-crypto-exchanges-thats-a-big-mistake

It goes back to my original concern, it destroys privacy and is literally impossible to implement.  I almost wonder if this is a way to ban many crypto assets by simply making them impossible to move to an exchange.

[polor12]

rules or more like conditions??? big company tells little you can do it too but,,follow these "conditions" and everything will be ok,

[wry]

On 6/15/2019 at 3:27 PM, OverRaz said:

As of what i heard, blockchain doesn't require (KYC) to have a wallet and store your money there, but it does require (KYC) for exchanging above $10,000 per day, there are alot of wallets that don't require (KYC) so i don't know why everyone is worried about this. 

It is aimed at EXCHANGES.  So yes, you can hold and keep crypto without any issues, but it will be much more difficult to convert it to other crypto and much much much more difficult to trade it for a national currency, e.g. USD, if you are so inclined.  That is the issue.

[Mikehoncho]

On 5/20/2019 at 1:36 PM, cryptonesiac said:

It can never be done... it's the old industries trying to control the new ones. They'll fail eventually

You're mostly right. Problem is, how much damage does it do to the current community before it does?

On 5/21/2019 at 7:21 PM, nuuuitsjdragon said:

This is bad news, very bad news indeed.

Although having this implementation > regulation which in turn bolsters support from the mainstream crowd, the increased usage definitely will increase value. 

However, too much regulation decreases the privacy and decentralisation of Cryptocurrency, which is in itself one of the main advantages. 

Eventually, if this goes on for too long Cryptocurrency will just be an alternative currency similar to foreign currency... oh well I guess we will have to see what happens.

I see it going  this way myself. It will bring more users, but again, at the cost of current traders, hodlers, and degens who are against kyc already.

On 6/15/2019 at 2:12 PM, wry said:

I almost wonder if this is a way to ban many crypto assets by simply making them impossible to move to an exchange.

Where'd i put my tinfoil hat?

[wry]

As expected, yesterday (Friday) the FATF announced the implementation of the travel rule described in the OP.   It will take nations a year or so to formulate the laws and regulations to make their exchanges comply, but it looks like this is happening.

Story with some details:  https://www.coindesk.com/fatf-crypto-travel-rule  

[Hoffguy]

Wow this is so typical of big financial economies trying to ruin one of the most attractive natures of crypto (anonymity). Yeah it's sad I think for the general idea it represents, that it really is an uphill battle for crypto to stay free and open - which is typical of our censorship / nanny state cultures. 

I find it reassuring to read this in the original article you linked: 

FATF “recommendations” aren’t legally binding, but countries that don’t follow them get blackballed in the global economy.

So presumably those countries that already support off-shore banking etc... perhaps the exchanges will move to these type of countries, and the main effect will be that exchanges will become more situated in certain countries than others? Maybe. I don't think we should assume from all of this that we will lose exchanges alltogether, I think the biggest impact will be on the exchanges who will have to adapt to survive. 

Because as mentioned above wallets will still be fine, so there's nothing stopping anyone from owning a wallet in one of the G20 countries and just using an exchange that operates in a part of the world that isn't subject to the FATF rule, maybe?

I also think this might see sites like localbitcoins.com become more popular, as people start taking trading into their own hands outside of the exchanges - if the exchanges do end up being significantly impacted. 

It's really interesting update Wryy thanks for sharing.

 

[wry]

On 6/22/2019 at 1:33 PM, Hoffguy said:

I also think this might see sites like localbitcoins.com become more popular, as people start taking trading into their own hands outside of the exchanges - if the exchanges do end up being significantly impacted. 

This is a great insight!  However, I expect they will continue to extend the regulations to individuals.  This will be easy in developed countries with income taxes, but I expect it will expand to all countries over time.  But yeah, until then localbitcoins, despite the often insane mark ups, is a good source for trading.

 

[DreamStage]

Thank you for such long detailed informations on the Travel Rule situation.

Also i am using Coinbase and have nothing against it using KYC as therefore my profits are all legalized and finnancial verified

Where it comes from that's not even public.

[wry]

23 hours ago, DreamStage said:

Thank you for such long detailed informations on the Travel Rule situation.

Also i am using Coinbase and have nothing against it using KYC as therefore my profits are all legalized and finnancial verified

Where it comes from that's not even public.

Exactly, I have nothing against being responsible and paying your taxes.  My concern is that this is going to stifle activity as exchanges now have to trace where all the crypto comes from.  That is much much harder than KYC and a real threat to crypto's privacy benefit.  It will be interesting to see how it unfolds!

[wry]

Update!

Sorry to necro this thread but the saga continues.  Last week the G-20 nations encouraged all countries and pressured others to adopt this travel rule.

Things like this coupled with the IRS going full medieval on US crypto users has me doubting the future for crypto for small scale users who will be compelled either to fill out massive paperwork or become technical "outlaws".

Link to story:  https://www.coindesk.com/g20-urges-countries-to-adopt-tough-fatf-rules-on-cryptocurrencies

[GeorgeFeb]

28 minutes ago, wry said:

Update!

Sorry to necro this thread but the saga continues.  Last week the G-20 nations encouraged all countries and pressured others to adopt this travel rule.

Things like this coupled with the IRS going full medieval on US crypto users has me doubting the future for crypto for small scale users who will be compelled either to fill out massive paperwork or become technical "outlaws".

Link to story:  https://www.coindesk.com/g20-urges-countries-to-adopt-tough-fatf-rules-on-cryptocurrencies

Well, when I see KYC I cringe!

Use P2P services, I know amazing one, buying there all the time, dunno what I'd do without P2P really!