Spain to Implement EU’s 5AMLD For Crypto Firms With Recent Amendment Proposal

Spain’s lawmakers have proposed an amendment to level up the country’s compliance with Europe’s Fifth Anti-Money Laundering Directive (5AMLD).

This set of regulations came into action earlier this year, pushing EU member states to take charge of crypto oversight within their jurisdictions. With Spain behind the EU’s schedule, its lawmakers will be ready to vote on the amendments within 2020.

The 5AMLD was implemented as a first step towards a comprehensive regulatory framework for digital assets. This first step comes after the crypto ecosystem became a new hub for illegal activity, such as terror financing and money laundering. Spain’s government website has since reiterated that its newly tabled draft law is in line with the 5AMLD objectives:

“The Draft Law advances in the reinforcement of the money laundering and terrorist financing control system, incorporating the new community provisions and including additional improvements in the current regulation to increase the effectiveness of prevention mechanisms.”

Once approved, the law will require crypto firms operating in Spain to register with the country’s financial watchdog. These include businesses such as crypto exchanges, custodial service providers, and digital wallet providers.

Apart from registration, entities in this industry will be required to prove compliance over their life span. Spain’s financial regulator will be able to monitor their activity through due diligence provisions.

Crypto Regulation on the Rise?

Spain’s action towards crypto-assets comes at a time when regulators across the globe are looking into crypto oversight. While it has been an uphill task to keep with these innovations, countries such as Japan and Singapore are quite ahead in implementing crypto regulations.

This first-mover advantage has placed Asia on the map as a leader in the digital asset ecosystem. China, which, previously banned crypto activity, has piloted its own CBDC, could this be another ‘regulatory’ perspective? It depends on which side of the table one sits on when it comes to decentralization.

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Author: Edwin Munyui

New Messaging Standard Pushes Crypto Industry Closer to FATF ‘Travel Rule’ Compliance

Crypto firms have made a step towards FATF compliance following the release of a messaging data standard for the Virtual Asset Service Providers (VASPs).

The initiative has been dubbed ‘IVMS101’ and was pioneered by the Joint Working Group on InterVASP messaging standards (JWG).

This milestone is set to revolutionize how crypto firms will be sharing data with regulators like FCA, FinCEN, MAS, JFSA, and the FATF.

According to the IVSMS101 whitepaper, adopting this standard will facilitate the exchange of KYC/AML information by VASPs in a harmonized manner.

Notably, the project is a product of three key stakeholders with interests in VASPs: International Digital Asset Exchange Association, Global Digital Finance, and the Chamber of Digital Commerce.

Sian Jones, the convener of JWG, has since confirmed that the team’s vision of a standard data model is now a reality:

“I’m pleased to confirm that the working group approved the final text and that the IVSMS101 data model standard now exists,”

InterVASP Messaging Standard, IVSMS101

With this tech in place, all VASPs will be required to integrate the IVSMS101 standard for interoperability and efficient communication.

Basically, the IVSMS101 pegs its underlying design on a universal language that will simplify the process of decoding information shared by ecosystem participants. The paper notes that such an approach, not only enhances regulation but also minimizes the cost of sharing information.

The International Digital Asset Exchange Association (IDAXA) said through an email to Coindesk that the launch of a common standard is a step in the right way since the Virtual Asset guidelines were published by FATF back in June 2019,

“Coming up with the Intervasp Messaging Standard 101 (IVMS101) as a common standard is definitely the first step in the right direction.”

As we approach FATF’s one-year progress review, the IVSMS101 standard will be a key topic. Sian Jones has been commended by the Chamber of Digital Commerce for steering and delivering on the project in good time:

“Our members have worked hard to create this standard and achieve consensus in advance of FATF timelines – a real achievement in such a complex area.”

Currently, the standard has already gained traction amongst crypto industry stakeholders with notable firms like TRISA and Sygna Bridge backing the initiative.

Despite the strong value proposition, IVSMS101 has yet to clear the air on how entities in regulated jurisdictions will communicate with those in less strict environments. What is, however, evident is the shift towards the sunrise phase where the industry is seeing more execution based on the plans and designs laid out earlier on.

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Author: Edwin Munyui

ECB Builds a Proof of Concept using Corda to Explore Anonymity in CBDC

  • European Central Bank finding the balance between allowing privacy and compliance with regulations
  • The purpose of the research is to be ready should the need arise for a CBDC in the future

European Central Bank (ECB) is now exploring anonymity in central bank digital currencies that would safeguard the privacy of those users who conduct low-value transactions but ensure high-value transfers are subject to anti-money laundering (AML) checks.

The research paper published by the central bank talks about the “major challenge” for the payments ecosystem in the digital economy. This challenge is striking a balance between allowing a degree of privacy and ensuring compliance with regulations.

As such, ECB has established a proof of concept for anonymity in digital cash, which is the central bank digital currency (CBDC). The paper reads:

“The proof of concept drawn up by the ESCB demonstrates that it is possible to construct a simplified CBDC payment system that allows users some degree of privacy for lower-value transactions, while still ensuring that higher-value transactions are subject to mandatory AML/CFT checks.”

The network is developed using Corda by the ESCB’s EUROchain research network, with support from R3 and Accenture using distributed ledger technology.

The proof of concept provides the bank with a digitization solution for AML/CFT compliance procedures where central banks or intermediaries other than that chosen by the user can’t see the user’s identity and transaction history.

The limits on anonymous electronic transactions, imposed via “anonymity vouchers,” are automated and additional checks are further delegated to the AML authority.

This proof of concept, however the bank says is just part of its ongoing research on CBDC. It clarifies that it doesn’t mean that they are proceeding with the CBDC.

“There is no immediate need to take concrete steps towards the issuance of CBDC in the euro area.”

They continue to analyze CBDC with the purpose of exploring new technologies and to be ready should the need arise in the future. Also, the proof of concept will help the bank in the assessment of how a CBDC will work in practice and how the specific technical features will affect its potential implications for an economy.

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Author: AnTy

Monero Workgroup: It’s Up to Exchanges Not Assets To Comply With Travel Rule; XMR Not Subjected

In a blog, the Monero Compliance Workgroup came to the conclusion that XMR is exempted from FinCEN Funds Travel Rule as it is not applicable to assets and cryptos like the XMR.

According to the blog, the rules set by the U.S. Financial Crimes and Enforcement Network (FinCEN) towards the Funds Travel Rule, are not applicable to XMR.

According to the Funds Travel Rule, financial firms when either sending or receiving money must keep and submit different types of information regarding the said transfer if the money in question is $3000 or more. However, FinCEN gave extra requirements in their May guidelines. The agency explained that when a transmission protocol fails to store such information, the person in question can provide the required details. Therefore, the interpretation is that there is no requirement to provide such information within the network.

According to the Monero Workgroup on compliance, it is the duty of crypto exchanges to provide such information and not cryptocurrencies. As a regulated exchange and one that adheres to both the AML and KYC requirements, it is required to store such transactional details and should pass that information to the relevant agencies. The blog concludes that Monero or any other crypto are not affected in any way by the Funds Travel Rule.

The statement continues to say that it is misplaced for any crypto to state that it is adherent to the Funds Travel Rule as it is meant for regulated entities and not the assets which these entities deal with.

However, as Cointelegraph reports, the statement may have been released a little bit late as various exchanges have gone ahead and removed Monero from its tradable assets. This has also affected other privacy coins as the exchanges are trying to evade any frictions with the regulators.

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Author: Joseph Kibe

Bitfinex Crypto Exchange Integrates Chainalysis Blockchain Analytics For AML Compliance

  • The new compliance solution is meant to protect platforms from the dangers of money laundering.
  • Chainalysis presently serves a total of 42 cryptocurrencies, though it previously only served Bitcoin.

Bitfinex is a platform that allows consumers trade both cryptocurrencies and major digital assets, much like other crypto exchanges. However, the market is becoming progressively stricter about the compliance procedures associated with anti-money laundering efforts. To ensure that Bitfinex keeps up with the requirements, the platform has employed a compliance solution with Chainalysis to “detect and prevent money laundering,” as well as other illicit activities for many cryptocurrencies, according to a press release from PR Newswire.

Jason Bonds, the Chief Revenue Officer for Chainalysis, commented that Bitfinex is often sought out by traders in the crypto space that are “seeking liquidity across various cryptocurrencies.” With this volume, the only way to be compliant with global regulations is with “an automated blockchain analysis solution,” which is what Chainalysis is providing. Bonds added, “We are thrilled to work with Bitfinex as we mutually invest in supporting multiple cryptocurrencies.”

Though primarily focused on Bitcoin earlier this year, Chainalysis has gradually expanded, leading them to now include 41 other cryptocurrencies. Some of these cryptocurrencies include Ether, Bitcoin Cash, Litecoin, Tether, Maker, Dai, and other ERC-20 tokens.

With the use of Chainalysis KYT, Bitfinex and other businesses have the ability to watch over massive crypto volumes, while continually identifying any high-risk threats. The alerts in real time make it easier for compliance teams to deal with imminent threats, while enforcing the policies set forth and mitigating resources.

Peter Warrack, the Chief Compliance Officer for Bitfinex, complemented the work of Chainalysis, calling their compliance solution “top-of-the-line, comprehensive, and privacy-safe.” He explained that these qualities allow Bitfinex to keep the bad players of the platform and to protect the good players that presently operate on it. Warrack remarked,

“The solution does not share information identifying users, which is kept strictly in-house. We are excited to work alongside the Chainalysis team to continue to build out a safe and robust platform for our users.”

The cryptocurrency ecosystem will continue to evolve, and regulatory requirements will follow suit. Any company that isn’t aggressive about pursuing and following these new requirements will quickly fall behind the in market, but Chainalysis has already made many accommodations to serve multiple blockchains ahead of these deadlines.

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Author: Krystle M

Bittrex Exchange Adds Chainalysis’ Real-Time Monitoring Software For Suspicious Crypto Transactions

Bittrex, a cryptocurrency exchange based in the United States, has adopted a new compliance tool for its product. According to the executives of the company, the new tool, which was created by Chainalysis, can be used to monitor and flag suspicious transactions on the exchange.

Chainalysis KYT (Know Your Transaction), this new piece of software can track transactions made on the platform with several currencies such as Bitcoin, Ethereum, Litecoin, Bitcoin Cash and others.

The company has chosen to adopt this technology because several regulators around the world are becoming concerned about how crypto exchanges regulate their own activities. The Financial Action Task Force (FATF), for instance, gave 12 months to the exchanges of it’s member countries to adapt and improve their procedures.

According to Bittrex, the technology will help it to become compliant with the local legislation at the same time that the company is able to go even forward and to create a database of all suspicious activity.

Representatives of the company confirmed that all addresses related to dark net sites and child exploitation sites, for instance, will be flagged. The information may then be shared with the authorities if necessary.

The Chief Security Officer of the company, Jonathan Levy, affirmed that this would also help in the automation of the company’s review process. This would be needed to scale it as the company is growing and it gets harder do it manually.

Exchanges with high volumes can benefit from this as they still need to monitor their transactions and it becomes harder to do so when their business becomes more popular.

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Author: Gabriel Machado