Virtual asset service providers (VASPs) just launched the OpenVASP initiative that aims to solve one of the biggest regulatory challenges, known as the "travel rule."
As a reminder, the rule necessitates that VASPs share customer info with each other, so that one exchange can confirm, for example, that a customer on another platform it’s sending 10 bitcoins to has a verified identity.
Today, at the Blockshow Asia conference in Singapore, Swiss-based Crypto Valley Association (CVA), International Digital Asset Exchange Association (IDAXA), ACCESS Singapore Cryptocurrency and Blockchain Industry Association along with key industry partners announced OpenVASP.
"The initiative will enable VASPs to transmit blockchain transaction information privately, immediately and securely, in compliance with the Financial Action Task Force (FATF) Recommendation 16, also known as the travel rule," according to a press release.
A whitepaper that proposes an OpenVASP protocol "based on key design principles of decentralization, privacy, broad applicability, while remaining agnostic to the virtual asset being transferred," has already been prepared.
The protocol would allow VASPs from across multiple jurisdictions to transact between themselves without necessarily knowing each other and without the need to register with a central authority or database, the announcement added.
“OpenVASP is a roadmap to FATF compliance that enables VASPs to protect private and business-sensitive data. We hope the community will consider it as a blueprint. Building partners are welcomed,” Chris Gschwend, Head of the CVA’s VASP / AML Taskforce, was quoted as saying.
The travel rule is "almost like applying U.S. postal mail rules to email for U.S. communication roles. Like pushing a square peg into a round hole for us, the blockchain ecosystem,” Tim Byun, a former regulator, now CEO of crypto exchange OKCoin, told Cryptonews.com earlier this year.
Meanwhile, Carlos Domingo, founder and CEO of security token platform Securitize, recently told Cryptonews.com that the digital securities industry is already ahead of the rest crypto industry in terms of KYC (know your customer) processes, so the impact of the travel rule should be minimal.