In response to the Financial Action Task Force’s (FATF) recently proposed anti-privacy guidelines for cryptocurrencies and cryptocurrency service providers, CipherTrace and Shyft have partnered up to create a solution that meets regulators halfway.
This according to a press release shared with BTCManager, June 02, 2019.
As per the press release, cryptocurrency intelligence firm CipherTrace has teamed up with Shyft, a company who has developed “a federated identity” and blockchain evidence platform, to deliver a solution to what the release describes as “a tough new recommendation” from the FATF.
The newly drafted anti-money laundering (AML) and anti-terrorism standards from the FATF were released on June 21, 2019, to a mixed response. It was initially thought that the FATF wished to see the whole industry operate under the same compliance standards as banks. This was one of the key negative narratives being driven by media outlets, which may have been a knee-jerk reaction at best.
Further analysis of the document revealed this is not necessarily the case, as the announcement helped to clarify the more ambiguous parts of the document regarding AML and know-your-customer (KYC) procedures.
However, according to CipherTrace and Shyft, one of the more debatable elements is the desire for the FATF to enforce “The Travel Rule,” which would require exchanges to provide customer data to each other whenever transactions of over $1,000 were conducted. Naturally, such a move would significantly lift the veil of privacy amongst cryptocurrency users.
The collaboration will see the development of a KYC and AML ecosystem where “participating exchanges can securely transfer Proof of Knowledge without disclosing personally identifying information (PII).”
For the pair, the aim is to achieve higher AML and KYC efficiency with a pilot program that offers exchanges “shared smart-contract and cryptographic access controls” for private data, allowing privacy to remain intact during a transaction unless legal authorities request otherwise.
Shyft founder Joseph Weinberg stated:
“This program bridges a critical gap between new regulatory standards and existing exchange operations to greatly strengthen the crypto ecosystem with a practical implementation of the FATF’s Travel Rule.”
Noting the extraordinary value placed on security and privacy by exchanges and their users, the press release describes present AML and KYC practices as lackluster, with present customer on-boarding solutions being either “too invasive or too relaxed.”
CipherTrace CEO Dave Jevans notes that this solution makes it possible for data to remain anonymous whilst offering authorities and regulators the “responsible disclosure” of the data should it be required for “legitimate” purposes, namely investigations into criminal or terrorist activity as well as AML compliance.
“This is the direction that CipherTrace is working on for the future growth of cryptocurrencies globally. We believe that there are technological and regulatory solutions that can preserve privacy while enabling security and compliance.”