The fate of Privacy-focused digital coins amid the FATF’s “travel rule”

The FATF gave till June 2020 to countries at the time of this declaration to enforce the guidelines in the travel rule. The rule has been a long-standing requirement for all monetary transactions taking place between international banks, but it may be a problem for Crypto exchanges as it undermines the principles of decentralization & privacy that the blockchain technology is based on.

With less than 7 months remaining for the VASPS to comply with the travel rule guidelines, the situation got further complicated with a recent Anti-Money Laundering (AML) Report by CipherTrace — a renowned blockchain compliance solutions provider.

The report highlights the fact that 65% of the top 120 digital exchanges that traded privacy coins had weak or porous KYC (Know Your Client) implementation (left chart above), let alone enforce the stringent rules under the new “Funds Travel Rule.” While only 32% of the top 120 crypto exchanges trade privacy coins, 63% of such VASPS had weak or porous KYC.

The general Crypto market has weakened significantly post-summer, the price movement & the trendline in the privacy coins, nonetheless, shows that the transactions have dropped significantly (right charts above). The worrisome part, however, is not the price drop or the loss of interest in transacting in privacy coins but that some of the VASPS have taken the easy way out — by delisting the privacy coins.

Recently, Cryptocurrency exchange BitBay announced that it would be delisting the biggest privacy-centric coin Monero due to money laundering concerns. Back in September, one of the biggest crypto exchanges OKEx delisted a number of privacy coins like Monero, Dash, Zcash, Horizen & Super Bitcoin (SBTC) on a similar pretext that they were unable to implement the FATF guidelines.

Is this the end of the rope for the privacy-focused cryptocurrencies? I hope not, but time will tell…