The Travel Rule Explained: Crypto's Take on US Banking Laws

So, there's this thing called the Travel Rule that's making waves in the crypto space. Basically, it’s mirroring some of the banking regulations we see in the US, aimed at keeping things clean and preventing money laundering. If you're curious to get into the details, check out the full scoop in the link. It’s stirring up some controversy and raising questions about privacy and the future of crypto transactions.

It's always interesting how new users come into the space and think cryptocurrency is better than what banks do or laundry mats used to. You realise the thing with this is just so governments can track people and isn't for general privacy removal or anything... Why do we assume bitcoin is better than banks for money laundering? It isn't, we just get told to trust what banks do and how they control the money supply. Also whyd they bring in polymer notes? The paper ones used to be sniffable by dogs (as far as law enforcement would say) in actuality, now people can remove the smell before travelling through airports... In addition, what's anyone going to do with a mere €1000, fucking nothing... I don't care how much a country thinks it can control another, the fact is they normally can't without making themselves looking like fools.

Liquidity concerns aside, Bitcoin's pseudonymity does provide an extra layer of privacy. It's the electronic equivalent of cash. Which is more private -- bank accounts with real names and ID documents tied to them, or Bitcoin addresses? The market is too illiquid to support really high volume money laundering at present, but that won't always be the case. The $1,000/€1,000 thresholds are extremely low, 5x lower than the existing suspicious activity reporting thresholds that US banks are subject to. It's upsetting. Fortunately, the Travel Rule hasn't actually been passed into law anywhere. For now, it's still nothing more than a guideline from the FATF.

First of all, it's a great article, Yokesh. Keep up your good work! Perfect! It's no wonder that FATF travel guidelines will make things easier for the governments to track down crypto users of any wallet size. But it's still a guideline and I don't think any of their member countries have yet made it into a law! But eventually, they will have to make it a law to remain a member of FATF and to remain in the green list! Any regulation around the world is specifically designed to get more visibility on their citizen's pocket. FATF is no exception! Bitcoin and other cryptos, are actually more anonymous than fiat currency. Because cryptocurrencies don't have to use a middleman. Today if I want to send someone $10,000 in the other part of the world, I can quickly do so without having to go through a banking channel. That's where the governments are worried because they aren't getting any visibility of this money transmission. It's neither sniffable by any dogs nor controllable by any government.  So there are two ways left for the governments - either they ban it completely or they regulate it! If all member countries of FATF pledges to ban it, common people like us will be hit big time! Big criminals don't really bother about regulations. But we, the tax payers will have to sell off our holdings just to ensure that we don't get into the radar of the government in any way. So I, as a common man, will always prefer regulation over banning because it saves me from legal hassles!

This is why in the end the authorities are aiming at having the same type KYC for crypto users as for bank account owners. And of course do not forget about one important thing - if the funds can be tracked, they can be easily taxed! Still, if we compare cryptocurrencies and banking system, there are differences which are an obstacle in making the same elements of applicable regulations. The travel ban is a good example. For buying cryptocurrencies it is easy - you can ban people from different countries subjet to eg. UN sanction list from buying cryptos at your website. But as with the crypto wallet addresses, we do not have something like IBAN/SWIFT codes assigned to the specific country. Of course, there can be a partial solution provided - no access/registration for online wallets from such country, but what about paper wallets you can generate by yourself?

Bank accounts are probably the most private thing you can place your money to, particularly the Swiss Bank accounts due to their notoriety on housing dirty money for years. It might be tied to someone's name, yes, but how can one be sure that the name linked on these bank accounts are of true nature? Identity forging and theft is easily done by nefarious entities that you can never be sure whether a name actually exists or not. Point is, most people with huge sums of cash to launder will always prefer to do it with the banks than in the open ecosystem of bitcoin. With the right connections, laundering money with the banks is easy.

Swiss and most other countries aren't really as private as they used to be due to international pressure. If you use banks you're leaving a paper trail, but harder to avoid them if you're dealing with bigger amounts of money. If you can get by with physical cash then you'll have more privacy if you store it in a safe place.

Cash is private, banks are not. That applies even to Swiss banks: Era of bank secrecy ends as Swiss start sharing account data Granted, but if Bitcoin were just as widely used as fiat currencies, you wouldn't need to risk all that. Why engage in identity fraud, and take the risk that banks and police will freeze your accounts if you didn't have to?

This is quite correct afaik, as the FAFT "Travel Rule" is the crypto world's equivalent of US "Bank Secrecy Act" travel rule, which requires your bank to report identifying information in transactions to other money service providers and in financial instruments of $3,000 or greater, and depending on how your bank interprets the reg.s, they report at the $1,000 level.  The crypto equivalent does not have the force of law behind it anywhere, but adherence to FAFT guidelines, scheduled to begin in June I believe, as a practical matter will be observed, or the non-observing country will be ostracized from trade agreements and conventions between countries.  So money service businesses will treat it like a law.