Industry Reps Propose Decentralized VASP Discovery System at V20 Summit
- The industry discussion during V20 has yielded six proposals for better counterparty risk management, a principle-based risk management approach, and specialized regulation.
- The summit’s call to action was to promote interagency and international dialogue.
- Almost 60 individual regulators across 18 countries joined the IDAXA-hosted VA20 summit at Bali.
Twenty Virtual Asset Services Providers (VASPs) came together at the V20 Summit, an annual event held in parallel to the G20 meet. And for those oblivious to the importance of V20, holding the event alongside the G20 isn’t just an empty statement meant for PR wins, as both summits jointly define global financial policies.
The key purpose of this year’s V20 summit was to announce specific industry proposals in response to the FTX collapse and TerraUSD crash, as well as its contagion effect, which led to crypto firms defaulting on their obligations.
The Key Proposals
#1 A Better VASP Discovery Mechanism
The participating VASPs proposed to implement a better mechanism to enable VASPs to discover one another for better counterparty risk management and enhance compliance requirements.
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#2 Reporting Threshold Equalization
The participant VASPs also proposed harmonizing reporting thresholds for transfers across jurisdictions, shifting to a principles-based risk management approach, and creating “a working group between Privacy regulators, FATF, and the International Organization of Security Commissions (IOSCO).”
#3 Call for Increased Collaboration
The proposal also outlined the need for increased collaboration between the FATF and the Global Privacy Assembly to enhance understanding of data privacy and also called for the FSB to draft regulations considering the uniqueness of the crypto industry.
Much-Needed Interaction
The summit provided a stage for the industry to interact and exchange with global regulators, such as the Financial Action Task Force (FATF) and the Financial Stability Board (FSB).
“It is crucial for the private sector and public sector to work closely together to establish close partnerships and share information and expertise,” said FATF President Raja Kumar.
While acknowledging the importance of industry cooperation in addressing financial crimes, Kumar noted that the nascent virtual assets industry acts as “a key entry point into the financial system,” which makes it the gatekeeper — “the crucial first line of defense.”
Many issues that regulators raised were discussed behind closed doors, and they acknowledged the need for more robust governance frameworks in the industry.
“Crypto assets and markets provide many of the same economic functions as traditional financial markets. As they do so, they must be subject to effective regulation and oversight commensurate with risk staples,” said FSB Secretary General Dietrich Domanski.
Summary
The proposals presented at V20 will expand cooperation, enhance dialogue between the regulators and the crypto industry, and improve the existing regulatory and compliance infrastructure. Also, the industry agreement to use a decentralized VASP discovery system to streamline Travel Rule compliance across exchanges is a major victory for the industry.
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