CipherTrace’s tool, called Traveler, takes its name from being designed to meet the complex requirements of the Financial Action Task Force’s so-called “Travel Rule,” which came into effect for Virtual Asset Service Providers, or VASPs, in 2020.
The FATF’s Travel Rule requires regulators and VASPs — including crypto exchanges, custody providers and over-the-counter trading desks — to gather and share customer data during transactions. This approach broadly follows the requirements already in place for money transmitters in jurisdictions like the United States, which requires money transmitters to record identifying information on all parties involved in fund transfers made between financial institutions.
What makes the travel rule particularly challenging for VASPs is the different local transpositions of the FATF’s guidelines in various jurisdictions across the world. Prior to adopting Traveler, Crypto.com had already been admitted into the International Digital Asset Exchange Association and Global Digital Finance, two associations that aim to establish consistent standards and regulatory practices for the global digital asset economy.
Traveler — which continues CipherTrace’s longer-term work on an open-source Travel Rule Information Architecture, or Trisa — is designed to specifically address the counterparty VASP due diligence that is demanded by the FATF guidelines.
The solution, therefore, helps VASPs share sensitive personal identifiable information to confirm crypto transactions and automatically identifies VASP-to-VASP transfers as well as the recipient VASP. The tool also scans addresses associated with incoming crypto transactions and verifies the originating VASP. In addition, it issues Know Your VASP digital certificates. All this forms the basis of an encrypted, mutually authenticated infrastructure for the secure sharing of sensitive data.
Crypto.com’s chief compliance officer, Antonio Alvarez, told Cointelegraph the reason why the company chose the CipherTrace tool in particular:
“For a travel rule tool to be useful, it needs broad acceptance, common standards and interoperability (with other tools). CipherTrace’s Traveler is based on Trisa’s Alliance which aims to address several points including interoperability. We are proud to be the first platform to implement Traveler and look forward to working with CipherTrace and our industry more broadly to standardize how compliance is handled.”
At the beginning of 2020, CipherTrace’s chief financial analyst, John Jefferies, said, “Travel Rule enforcement is simultaneously the biggest milestone and the biggest setback for crypto. It has and will continue to force a level of maturity that will enable the industry to grow into an institutionally accepted asset class. […] It also presents an existential threat for many exchanges and poses potential privacy issues for users. The Travel Rule compliance operations will be costly even with open-source software like Trisa.”