In a conference hosted by the blockchain analysis company Chainalysis, the Director of Financial Crimes Enforcement Network (FinCEN) Kenneth Blanco stated that the U.S government will be observing a strict implementation of the “Travel Rule.”
According to the “travel rule,” any entity engaging in cryptocurrency exchange is required to share their customer’s identity, beneficiaries and identity of the original parties if the exchanged amount is $3,000 or higher. These entities can range from wallet service providers to digital asset exchanges.
The decision was long pending and is not a shocking revelation. Over the past few years, crimes involving cryptocurrency has increased considerably. With lack of laws, activities such as money laundering have gone unchecked for a long time, with investigators trying to identify and counter some of the major money laundering centers around the globe.
According to a report released in August by CipherTrace, a company involved in blockchain tracing and security, the amount involved in scams, fraud and cryptocurrency thefts exceeded $4.3 billion this year and $1.2 billion in the first quarter of the year alone.
Blanco was very clear on the government’s stance, stating “It (travel rule) applies to CVCs (convertible virtual currencies) and we expect that you will comply, period.” The government expects full cooperation and compliance according to Blanco; this step was expected and not new.
In Blanco’s words, FinCEN has been examining the travel rule since 2014. This rule is mostly violated by businesses that use digital currencies and engage in exchange through different cryptocurrency platforms.
When Convenient, the Government Relates to Cryptocurrency as Money
The news was taken as a surprise by people engaged in cryptocurrency. Since the travel rule applies to currencies, people were under the impression that the cryptocurrency would not fall under it, as it has never been recognized has money. For a lot of people, it came as shock that the government was bundling cryptocurrency with money, as it had never done this before.
The government’s decision to implement this rule comes after U.S led FATF (Financial Acton Task Force) introduced some guidelines to counter terrorism financing and money laundering. The FATF has also asked crypto exchanges across the globe to comply with the guidelines of the travel rule, giving them a year’s time starting this June. These demands didn’t quite achieve the desired response from crypto exchanges, nor from Chainalysis.
Originating back in 1996, the travel rule was introduced by FinCEN to counter money laundering in financial institutions within the U.S. In 2013, the rule was changed to also include cryptocurrency However, it took 6 years for the Treasury to affirm that guidance.
