The extension of Travel Rule has been done to crypto exchanges, virtual asset services providers (VASPs), requiring to collect the names of both transaction senders and receivers along with the national IDs of the former. This development is thought to be an existential crisis in this anonymous crypto sector. There are both possibilities and disappointments like the rule extension could drive the entire ecosystem back into the dark ages.
The rule alienated the industry in two parts one is into the light of existing international financial regulation and another is into the dark net.
The Travel Rule has been in place for more than two decades and its extension to crypto depicts the persistent international power of the U.S. through the Financial Action Task Force, but FATF is not practicing the direct control by extending the U.S. travel rule to VASPs. But the organization is exercising indirect power in influencing whom and where protocological control.
Alexander Galloway developed in the 2004 book protocol: How Control Exists After Decentralization where he showed how the World Wide Web consortium (W3C) and the Internet Engineering Task Force shaped the coding of computing protocols underpinning the design of HTML. Without developing a segregated protocol for enabling the exchange of customer information amongst VASPs, the FATF is also exercising the same influence over the protocols.
To bring interoperability amongst crypto startups, the FATF is promoting market competition both among crypto startups and banks.
What FATF is doing has encouraged a level of cooperation and mutual learning between industry and regulators. The methodology that FATF has adopted is classifying the crypto-ecosystem into dual infrastructure.
To the centralized infrastructure, it’s ok with the Travel Rule and its identification requirements. But a more decentralized infrastructure is pushed further into gray markets. It is thought that it weakens the attempt of FATF to bring the entire ecosystem into official regulatory remit.
Is the way clear?
On the off chance, illicit activities are promoted through this infrastructure; it will be failure to attract regulatory attraction. The crack between privacy-focused and identification-compliant infrastructures in the crypto-ecosystem may amplify further. Who knows indirect power will be fickle and international regulators will be seeking for more direct forms of control. AML/CFT regulation may come in place making the gaps between infrastructures narrow.