The rule is meant to prevent bad actors from using crypto to launder money, and it affects everyone from exchanges to everyday investors. Nikopolos guides you through it:
Hence, unlike most nations, the U.S. did not need to formulate a new regulation from scratch to comply with FATF’s recommendations. Under this rule, FinCEN requires crypto asset service providers to confirm that crypto transactions do not originate from or are not sent to sanctioned countries or companies.As mentioned earlier, the core purpose of issuing this regulation is to block terrorist financing and money laundering.
Understandably, this is a tad difficult because the crypto industry historically favors a decentralized model of operation. That said, crypto service providers are coming to terms with this situation, with many adopting protocols specially designed to aid the transfer and collection of encrypted data. Examples of these protocols are OpenVASP, Shyft, TRISA and TRP.
Also worth mentioning is the apparent security risks to which VASPs will be exposed while transmitting users’ information. It is crucial to set up additional security systems that would shield users’ data from such risks.