Notabene has teamed up with the blockchain analytics firm Chain analysis Providing a “scalable” travel rule solution for companies that focus on cryptocurrency.
Crypto-related companies are consistently working to adhere to updated regulatory guidelines regarding counterparty risk. Perhaps the most notable of these requirements, according to a blog post by Chainalysis, is the travel rule that is relevant to virtually any crypto-focused company operating in FATF-compliant jurisdictions.
The blockchain firm added that the travel rule stipulates and mandates that virtual asset service providers (VASPs) such as digital currency exchange must precisely “identify the originators and beneficiaries of cryptocurrency transactions initiated by their users of a certain size”. Chainalysis also mentioned that in cases where the counterparty to these transactions is a VASP, “the original VASP must then transfer this user information to the second VASP,” Chainalysis clarified.
Chain analysis added:
“To meet the requirements, VASPs need simple tools that allow them to identify transactions that meet the requirements of the rule, get the users’ KYC information, and send it to the VASP counterparties when the transactions are complete. All of this needs to be done immediately so as not to compromise the user experience. This is not an easy task for cryptocurrency companies that process thousands of transactions every day. “
Chainalysis also noted that they partnered with Notabene to offer a “smooth, scalable” tool that “does just that”. With their integrated solution, crypto companies can automate transactions with “trusted” counterparties while providing them with the data they need to identify “suspicious” activity while complying with their legal guidelines. Chainalysis added that “with the introduction of cryptocurrency companies, travel rule compliance can begin immediately”. This should put them “in a better position with regulators and gain a market advantage,” the blockchain firm stated.
The travel rule is designed to help crypto-related businesses or businesses reduce counterparty risk while creating a source of money for digital currencies that their users receive. Although certain jurisdictions have implemented the rule differently, the version proposed by the FATF states that VASPs must exchange counterparty data with each other for crypto transfers worth more than $ 1,000 or EUR 1,000.
As noted by Chainalysis, the originator and beneficiary VASPs must provide each other with the following information:
- The originator VASP must provide the originator’s name, cryptocurrency address and physical address or national ID number or customer ID number or the date and place of birth.
- The beneficiary VASP must provide the beneficiary’s name and crypto address.
Chain analysis further noted:
“At first glance, the travel rule appears to be a simple matter of transferring counterparty information between two VASPs. In reality, however, the travel rule requires major changes to existing compliance processes, as VASPs must identify and take action in real time, and all transactions that meet the rule’s threshold. This presents significant technical challenges, especially when implementing it on a large scale, as the blockchain analysis shows that approximately 12% of all VASP transactions in February 2021 – a total of approximately 2 million transfers – are below the current FATF recommended threshold of 1000 USD would fall. “
(Note: For more information on the technical challenges introduced by the Travel Rule, see here.)
Chief Government Affairs Officer for Chain Analysis Jesse Spiro specified:
“Notabene’s platform provides a comprehensive, seamless and accessible offering that meets and exceeds the unique needs of VASPs around the world. This integration gives VASPs an additional tool for compliance with legal requirements, risk reduction and data-driven decision-making. “
Pelle Braendgaard, CEO of Notabene, commented:
“In a rapidly growing and increasingly competitive industry, we see crypto companies that view regulatory compliance as a market advantage perform better. By responding to requests like the travel rule in a timely manner, they can unlock new opportunities: build the next suite of regulatory financial products, obtain licenses to operate in the largest financial centers, and expand their reach to new customer segments. We look forward to helping companies realize their growth plans. Through our partnership with Chainalysis, we offer crypto companies a comprehensive solution for performing compliance on a large scale. “