New Beginnings for Crypto at V20
An impending storm is brewing in the crypto ecosystem, and this is not because of the current bear market. After all, cyclical peaks and troughs are a reality for any industry, immaterial of how long it has been in existence. If we think carefully, no single industrial sector in the world could claim to have stayed immune from the wrath of time.
Instead, what’s more concerning about the crypto industry today is the existential crisis it is finding itself in, which was exacerbated further by the TerraUSD crash and FTX and Celsius Network collapse this year. And at the juncture we are in now, the entire industry’s future rests on the direction the industry players and regulators will take from here.
Amid all these, one thing became absolutely clear: the crypto industry needs global alignment, which is what Shyft Network has been striving for from day one. Without harmonization of global standards and national implementation in the crypto industry, there’s a risk that differences may deepen, significantly impacting what regulators and industry advocates, and pioneers like Shyft Network have been working on for years.
This lack of global unity on crypto regulations standards and very slow implementation of existing regulations has emboldened both internal and external malicious actors to pull off large-scale hacks, rug pulls, and crashes. After all, the lack of global cohesion on cryptocurrencies weakens the precautionary and counter-response measures to prevent such instances.
The recent unfortunate market events have accelerated the adjustment process and, in a way, prompted the industry to finally start taking decisive steps toward improving the health of the ecosystem. Last week, in V20, lead industry representatives agreed to implement a decentralized VASP discovery mechanism to enable travel across all exchanges and the industry.
Shrinking Market Capitalization
The total capitalization of the cryptocurrency market has dramatically receded over the past year: from a little more than US$2.5 trillion to substantially lower than US$1 trillion. And if the wiping out of more than US$1 trillion in market value was not enough already, FTX, one of the most well-known crypto exchanges globally, declared itself bankrupt on November 11.
The problems the crypto industry faces today aren’t only because of the FTX and previous similar fiascos, although they did aggravate the already chaotic situation. Instead, the root of the problems lies deep within, the most prominent of which is the absence of clear laws and the slow and fragmented adoption of international standards, such as the FATF Travel Rule.
Sensing the need for a change, leading VASPs held discussions with regulators at the V20 summit in Bali to promulgate decisive steps to contribute to solving the problems plaguing the crypto industry.
VASPs and Regulators Getting Together to Reinforce Trust
To improve the global regulatory and compliance infrastructure through cooperation and dialogue, twenty Virtual Asset Service Providers (VASPs) met with regulators at the V20 summit held parallel to the G20 Leaders’ Summit on November 15–16, 2022.
The summit was hosted by the International Digital Exchange Association (IDAXA) in association with the Asosiasi Blockchain Indonesia (ABI), and supported by GBBC Digital Finance, while the regulator representatives group was led by the Financial Action Task Force (FATF) and the Financial Stability Board (FSB).
What came out from the Industry of this constructive series of discussions was a set of key proposals:
- Creation of a decentralized mechanism to allow VASPs to discover one another easily, which will aid in the seamless management of counterparty risks and enhance compliance requirements.
- Set a unifying threshold for cross-jurisdiction transfer reporting.
- Enhance the FATF-Global Privacy Assembly collaboration as means to enhance understanding of Data Privacy.
- Form a working group between privacy regulators, FATF, and the International Organization of Security Commissions (IOSCO), while urging the FSB to consider drafting specialized regulations for the industry’s unique activities.
- Finally, strive to achieve a principles-based risk management approach to nip the risks in the bud.
The key output, according to Malcolm Wright, Shyft Network’s Head of Strategy and GBBC Digital Finance’s Director of Government and Regulatory Affairs APAC, included “harmonization on a single, global VASP counterparty discovery. Why? Because it is an essential building block to VASP’s understanding of who/where their counterparty VASP is and what Travel Rule Solutions they use — it is seen as the first step towards compliance and risk mitigation. At the same time, it will facilitate faster implementation of regulations in jurisdictions that are lagging behind.”
Global alignment is very much needed for a strong and stable crypto industry. The Shyft Network has spotted the challenge since its inception and has been working towards finding a solution for strengthening the ecosystem. And now, with industry reps agreeing on a single, global VASP counterparty discovery mechanism at V20, finally global alignment is shaping and taking a clear direction.
This is not only a big win for the industry but also for the Shyft Network, as its Shyft Veriscope is the only frictionless Travel Rule Solution in the market from a user perspective.
To know more details, check: Shyft Veriscope — The Critical Infrastructure underpinning FATF Travel Rule
A lot of work still lies ahead, yet the precedent set at the V20 summit certainly is a gigantic step forward for the entire industry.
The discussions and collaborations between the industry leaders and global regulators will continue over the coming months under IDAXA’s leadership, and Shyft will continue to be there to engage with all key players to shape the future of the global crypto industry. However, more and more VASPs must participate in these discussions, as we are in a phase that will define the future course of action of the entire crypto ecosystem.
VASPs need a Travel Rule Solution to begin complying with the FATF Travel Rule. So, have you zeroed in on it yet? Check out Veriscope, the only frictionless crypto Travel Rule compliance solution.
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