After the inaugural summit that happened in 2019, the V20 Virtual Asset Service Providers Summit was virtually held in Osaka, Japan, in 2020. The key discussions in the 3-day virtual event included creating an industry response to the global anti-money laundering (AML) watchdog.
In addition, the Financial Action Task Force’s (FATF) regulatory requirements and Recommendations 16 ‘Travel Rule’ were discussed at length during the summit.
Held on November 16-18th, 2020, the summit also covered crypto regulations and brought together government officials, regulators, key blockchain stakeholders, virtual asset service providers (VASPs), and technical solution providers (TSPs).
V20 Summit Discussions
Among the most critical discussions during the V20 summit was the ‘Travel Rule,’ a Recommendation 16 in the Virtual Travel Guidelines written by the Financial Action Task Force (FATF). Briefly put, the Travel Rule is the sharing of client information between the sender and recipient intermediaries to prevent money laundering and terrorist financing.
The Travel Rule presented a challenge in that there were no consultations with the crypto industry when it was enforced. As a result, there was no way of knowing who the stakeholders could be within Bitcoin and cryptocurrency transactions, especially by just looking at their blockchain addresses.
Virtual Asset Trade Associations saw the need to address the regulators to discuss the Travel Rule concerning the cryptocurrency industry. The V20 Summit brought together the most influential International VSAPs, who could interface with the FATF, Regulators, and Government Officials from different countries.
Before the V20 Summit, Sian Jones, JWG convener, and senior partner at XReg Consulting, had been instrumental in criticizing FATF’s interference with Crypto. She implored FATF to develop new strategies aimed at managing money laundering and terrorist financing. Sian argued that the body did not seem to grasp that cryptocurrencies were not introduced to break any existing financial laws but rather to complement traditional finance.
The second day of the Summit was for VSAPs, where the Industry Regulators presented industry representatives with space to address the concerns previously raised by the regulators.
Third-day discussions were industry-specific. Technical Service Providers were part of the agenda and the close of the day saw the submission of key takeaways to Regulators.
A major view raised at the Summit was to create an entity that represented the views of the VASPs. The International Digital Asset Exchange Organization (IDAXA) was therefore created in partnership with Global Digital Finance (GDF) and supported by the Chamber of Digital Commerce (CDC).
IDAXA’s Chairman, Anson Zeall, was a key convener at the 2020 V2O Summit. He led the Singapore self-regulatory organization ACCESS SG, which released an independent assessment of the Sygna Bridge network.
CDF, CDC, and IDAXA came together under the auspices of the joint working group and released the new InterVASP Messaging Standard (VMS101). This allows technical solution operators to work under a unified language data standard. Sygna creator CoolBitX has since announced an interoperability Proof of Concept (PoC) with Ciphertrace’s TRISA. The two are currently working together with other technical solutions providers.
What Organizations Were Present at the V20 Summit?
Also in attendance were non-profits and their members, including Blockchain Industry Association, Singapore Cryptocurrency, Crypto Valley Association, Blockchain Australia, Crypto Valley Association (Switzerland), Korea Blockchain Association, Sygna, Open Vasp, TRISA, and more.
Regulators in attendance were representatives from the Financial Action Task Force, Financial Crimes Enforcement Network ((FinCEN), US Department of Treasury, Monetary Authority of Singapore (MAS), and Japan Financial Services Agency (JFSA).
In addition, observer officials representatives from Switzerland, Australia, Canada, and Taiwan were present.
Recommendations Made At The V20 Virtual Asset Service Providers Summit
Most of the resolutions cemented Osaka 2019’s V20 Summit and centered around fostering collaboration between the nascent cryptocurrency industry. The Regulators sought to deliver a standard response to the guidelines given by the FATF.
FATF amended its Recommendation 16 Travel Rule to state that VASPs should collect both senders’ and recipients’ user information. This information should include dates of birth and residential addresses and be shared by beneficiary institutions.
A session held by the V20 summit discussed Insights on the Technical Response to the Travel Rule. It was moderated by Summit Chair Mark Pesce and panelists including Filip Gospodinov (21 Analysts CTO), Elsa Madrolle (CoolBitX Managing Director International), and Notabene CEO Pelle Braandgaard, and Shyft Network CEO Joseph Weinberg.
A well-received demo of the compliance solution was conducted by Elsa Madrolle. It put into context the workflow and showed the exchange of information between Korean and Taiwanese exchanges Bitsonic and BitPro.
Risks associated with stablecoins and Decentralized Finance (DeFi) were also tackled in the V20 Summit. The fields have been identified as targets for Europe’s incoming Markets In Crypto Assets (MiCA) Regulations. The consensus to form an entity that presents the view of the VASPs yielded IDAXA, and a report of the Summit was submitted to the industry at the conclusion of the V20 Summit.
The Crypto industry is dynamic and evolves much faster than any regulator can keep up with. With this rise, there is also an increase in avenues that can be used by money launderers and terrorists to transfer or exchange money. For example, there was a dramatic rise in decentralized finance protocols in 2020 that looked similar to the unchecked rise of initial coin offerings (ICOs) in 2017.
Also, according to Carole House, a FinCEN tech policy specialist, illegal entities such as terrorist associations or money launderers used the emerging cryptocurrency avenues to complete trans-border payments. Thus, FinCEN, in line with discussions at the V20 summit, sought to lower the Travel Rule transaction threshold for collecting intermediary information to $250 in crypto or fiat currencies.
The provision for industry players to interact with regulators will ensure that dialogue lines remain open. This is vital in ensuring that new regulations do not hinder innovation in the crypto industry. As a result, virtual Asset adoption will keep improving without posing a threat of money laundering and terrorism finance.
Featured image source: access.org.sg