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Gemini’s Travel Rule measures reflect ‘worrying creep’ of overregulation

November 9, 2023 Coin Telegraph

Gemini will be restricting its UK users to sending only to 58 virtual asset service providers that are registered under the Travel Rule starting Nov. 17. A Trezor analyst argues the measures will go against the principles of Bitcoin and financial freedom.

Crypto exchange Gemini newly announced measures to comply with the controversial crypto Travel Rule in the United Kingdom reflects a “worrying creep” toward overregulation and will strip customers of their freedom for self-custody, according to a Trezor analyst.

On Nov. 7, cryptocurrency exchange Gemini announced it has made changes in order to comply with the new Travel Rule restrictions for customers in the U.K.

Gemini said it will restrict outward cryptocurrency transfers to a list of 58 virtual asset service providers (VASPs) registered under the Travel Rule Universal Solution Technology (TRUST) starting on Nov. 17.

Gemini’s statement on the new Travel Rule restriction. Source: Gemini

Speaking to Cointelegraph, Trezor Bitcoin analyst Josef Teteka said the move will only serve to limit the options for those looking to self custody their crypto.

“The forthcoming restrictions from Gemini UK will make it much harder for Bitcoin and other cryptocurrency users to move their assets into self custody,” said Tetek, noting that the requirements include providing one’s name, name of beneficiary and in some cases, their address.

“This goes against the fundamental principles of Bitcoin, where the user rightly enjoys freedom, privacy where required, and ultimately self-sovereignty.”

This is dog
Email just received from @Gemini
“Travel Rule: Changes to crypto transfer requirements for UK customers”

global hub for cryptoassets my a**, Rishi!

(I barely use Gemini Anyways but still ‍♂️) pic.twitter.com/tuqhSLyZgg
— Robin Nakamoto (@RobinNakamoto) November 3, 2023

Gemini said its UK restrictions will also apply to incoming transfers from non-TRUST VASPs starting in December, with Gemini stating it may freeze or limit accounts attempting to make inbound transfers.

Tetek said the case at hand represents a “worrying creep towards over-regulation” which could result in the “control of its everyday citizens and the choices they make” around how they save, spend and transfer their assets. He added:

“As we’ve seen again and again, crypto exchanges can and do assume control and ownership of their user’s digital assets, a situation that can end in disaster. Why should they now also be the arbiters of transactional freedom?”

Several X (formerly Twitter) also expressed negative sentiment on the recent Gemini announcement.

Many people have the misconception that the only way to acquire Bitcoin is by buying it on exchanges. This belief is far from the truth. There are countless alternative ways to obtain Bitcoin, such as mining, earning it through services or products, and even P2P transactions.

/2
— rare ☠️ passenger.gfm (@rarepassenger) November 7, 2023

The Travel Rule was created by the United Nations agency Financial Action Task Force in June 2019.

It is a set of global standards that mandates VASPs and other financial institutions to share information about the senders and recipients of virtual assets. Its objective is to make it more difficult for criminals to use cryptocurrencies for illicit activity.

The U.K. passed legislation to begin enforcing the Travel Rule in July 2022 which came into effect in September.

Among the 58 VASPs not restricted to transact with Gemini U.K. users include Binance US, Coinbase, Circle, Fidelity Digital Assets, Kraken and PayPal.

Magazine: Deposit risk: What do crypto exchanges really do with your money?

UK’s Travel Rule comes into effect, could halt certain crypto transfers

September 1, 2023 Coin Telegraph

Coin Telegraph

The crypto Travel Rule, which came into effect on Sept. 1, aims to stop anti-money laundering and counter-terrorist financing activities carried out on-chain.

Cryptoasset businesses in the United Kingdom could now begin withholding certain crypto transfers to comply with the new Travel Rule for crypto that came into effect on Sept. 1.

The rules targeting virtual asset service providers were first introduced by the Financial Conduct Authority on Aug. 17, and see to it that VASPs based in the U.K. will “collect, verify and share information” relating to crypto-asset transfers.

If an inbound payment is received from a person or entity from an overseas jurisdiction that hasn’t implemented the Travel Rule, the VASP must make a “risk-based assessment” as to “whether to make the cryptoassets available to the beneficiary.”

The Travel Rule is designed to bring greater transparency to cryptoasset transfers, making it harder for criminals to use #crypto for illegal activity.https://t.co/kmB6rgMn5e
— Financial Conduct Authority (@TheFCA) August 17, 2023

The same rule would also apply to Brits looking to send payments outside of the U.K.

The Travel Rule was created by the UN agency Financial Action Task Force in June 2019. The U.K. passed legislation to begin enforcing the Travel Rule in July 2022.

It attempts to prevent anti-money laundering (AML) and counter-terrorist financing (CTF) activities carried out on-chain.

Other countries that have adopted the Travel Rule include the US, Germany, Japan, Singapore, Switzerland, Canada, South Africa, the Netherlands and Estonia, according to Sygna.io.

On June 23, the FATF called out member states for failing to sufficiently implement the rule after a survey revealed more than half of them have failed to take any action towards implementing the rule.

A March 2022 survey by FATF found only 29 of 98 jurisdictions at the time passed the requirements needed as part of the travel rules and a small subset of these jurisdictions had started enforcement.

Ian Andrews, the chief marketing officer of blockchain forensics platform Chanalysis explained in April 2022 that coordinating the exchange of information between VASPs cross-borders will be a “pretty hard problem” to solve — at least at the onset.

Magazine: Deposit risk: What do crypto exchanges really do with your money?

Crypto travel rule implementation ‘remains relatively poor,’ says FATF

June 26, 2023 Coin Telegraph

anti-money laundering

The United Nations body called on all member states to implement the Travel Rule “without delay” to close “loopholes” not currently protected by regulation.

A renewed call from the Financial Action Task Force (FATF) has asked countries to implement the “travel rule” to combat money laundering and terrorism financing activities enabled by cryptocurrencies.

On June 23, the United Nations body — whose role is to promote strategies to combat money laundering and terrorist financing — explained that “many” member states have failed to implement the rule.

The call comes after a series of FATF meetings at its headquarters in Paris.

The FATF plenary has concluded. Delegates of governments from around the world discussed a range of money laundering and terrorist financing issues.

See the outcomes of the plenary here➡️ https://t.co/s0nmYw1ca6 #FATFWeek #moneylaundering #terrorismfinancing #followthemoney pic.twitter.com/DTerSET5QT
— FATF (@FATFNews) June 23, 2023

FATF claimed “more than half” of respondents in a survey said they had taken no action to implement the rule:

“More than half of survey respondents have not taken any steps towards implementing the Travel Rule, a key FATF requirement to prevent funds being transferred to sanctioned individuals or entities.”

FATF urged countries to implement anti-money laundering (AML) and counter-terrorism financing (CTF) measures on crypto-related activities “without delay” in order to prevent “criminals” from exploiting “significant loopholes” not protected by regulation.

A March 2022 survey by FAFT found only 29 of 98 jurisdictions at the time passed the requirements needed as part of the travel rules and a small subset of these jurisdictions had started enforcement.

The FAFT travel rule was implemented to target the anonymity of illegal cryptocurrency transactions. It was introduced in June 2019 and last updated in June 2022. A further update of the rules was agreed to by FATF members at the meetings.

Lack of regulation of virtual assets in many countries creates opportunities that criminals and terrorist financiers exploit.

The FATF is closely monitoring global implementation of its strengthened requirements for virtual assets.

Learn more➡️https://t.co/rDuXbjpJh7 #FATF pic.twitter.com/3HuZIbT4ZK
— FATF (@FATFNews) June 21, 2023

FAFT said it would publish a report on June 27 calling on member countries to implement its recommendations in order to close the loopholes which it says criminals look to exploit.

The report will make mention of North Korea’s illicit virtual asset activities, where stolen funds are then allegedly funneled into its Weapons of Mass Destruction program, FAFT said.

Illicit activities from other “emerging risks,” such as stablecoins, decentralized finance, nonfungible tokens (NFTs) and peer-to-peer transactions will also be discussed in the report, it added.

Magazine: Unstablecoins: Depegging, bank runs and other risks loom

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Countries ignoring crypto AML rules risk placement on FATF’s ‘grey list’ — Report

November 8, 2022 Coin Telegraph

anti-money laundering

Reports suggest the Financial Action Task Force will conduct annual checks to ensure countries are enforcing anti-money laundering rules for crypto providers.

Countries failing to adhere to anti-money laundering (AML) guidelines for cryptocurrencies could find themselves added to the Financial Action Task Force’s (FATF's) “grey list."

According to a Nov. 7 report from Al Jazeera, sources say the global financial watchdog is planning to conduct annual checks to ensure countries are enforcing AML and counter-terrorist financing (CTF) rules on crypto providers.

The grey list refers to the list of countries the FATF deems as “Jurisdictions under Increased Monitoring."

The FATF says countries on this list have committed to resolving "strategic deficiencies" within agreed timeframes and are thus subject to increased monitoring.

It differs from the FATF "blacklist," which refers to countries with "significant strategic deficiencies in relation to money laundering", a list which includes Iran and the Democratic People's Republic of Korea.

At the moment, there are 23 countries on the grey list, including Syria, South Sudan, Haiti and Uganda.

Crypto hotspots like the United Arab Emirates (UAE) and the Philippines are on the grey list as well, but according to FATF, both countries have made a "high-level political commitment” to work with the global financial watchdog to strengthen their AML and CFT regime.

Pakistan was previously also on the list, but after taking 34 actions to solve FATF’s concerns, they are no longer subject to increased monitoring.

One of the anonymous sources cited by Al Jazeera noted that while failure to comply with crypto AML guidelines won’t automatically put a country on the FATF’s grey list, it could affect its overall rating, tipping some to fall into increased monitoring.

Cointelegraph has reached out to the Financial Action Task Force for comment but has not received a response at the time of publication.

In April 2022, the AML watchdog reported that many countries, including those with virtual asset service providers (VASPs), are not in compliance with its standards on Combating the Financing of Terrorism (CFT) and Anti-Money Laundering (AML).

Under FATF guidelines, VASPs operating within certain jurisdictions need to be licensed or registered.

In March, it found that several countries had “strategic deficiencies” in regard to AML and CTF, including the United Arab Emirates, Malta, the Cayman Islands and the Philippines.

In October, Svetlana Martynova, the Countering Financing of Terrorism Coordinator at the United Nations (UN) noted that cash and hawala have been the “predominant methods” of terror financing.

However, Martynova also highlighted that technologies such as cryptocurrencies have been used to “create opportunites for abuse.”

“If they’re excluded from the formal financial system and they want to purchase or invest in something with anonymity, and they’re advanced for that, they’re likely to abuse cryptocurrencies,” she said during a “Special Meeting” of the UN on Oct. 28.

Terrorists are funding their horrible deeds with crypto: UN officials

October 31, 2022 Coin Telegraph

Antonio Guterres

Cash and hawala remain the “predominant methods of terror financing,” according to a UN official, however, "advanced" terror organizations are turning to cryptocurrencies.

Terrorist groups who have been excluded from the “formal financial system” have turned to crypto to fund their heinous activities, according to Svetlana Martynova, the Countering Financing of Terrorism Coordinator at the United Nations (UN).

The UN official made the comments during a speech at a “Special Meeting” run by the UN’s Counter-Terrorism Committee (CTC) in New Delhi and Mumbai on Oct. 28-29 — which was focused on combating the use of “new and emerging technologies” for terrorist purposes.

Martynova said that while cash and "hawala" — a traditional system of transferring money in Arab countries and South Asia — have been the "predominant methods" of terror financing, "we know terrorists adapt to the evolution of conditions around them and as technologies evolve they adapt as well," she said.

Martynova noted that these technologies include cryptocurrencies, which have been used to “create opportunities for abuse,” she said, adding:

“If they’re excluded from the formal financial system and they want to purchase or invest in something with anonymity, and they’re advanced for that, they’re likely to abuse cryptocurrencies.”

UN Secretary-General Antonio Guterres also stated that while emerging technologies have an “unmatched potential to improve human conditions everywhere,” the harm done also expands far beyond that of terror financing:

“Terrorists and others posing hateful ideologies are abusing new and emerging technologies to spread disinformation, foment discord, recruit and radicalize, mobilize resources and execute attacks.”

As for how the UN plans on handling the issue at an international level, Martynova said the main challenge is to get nation-states on board with its regulation.

“We have very clear global standards from the Financial Action Task Force (FATF) and the resolutions of UNSC,” she said.

However, Martynova added that very few countries have started the work on regulation, and even less so are “successfully enforcing that regulation” to deter ill-intended non-state actors.

Some efforts are being made at the state level, with the United States Department of the Treasury most notably sanctioning crypto mixer Tornado Cash over money laundering and cybercrime concerns.

A number of blockchain-based forensic firms such as Chainalysis and Elliptic have also come about in recent years to track down cybercriminals and report their activities to governments — which has helped fade away the myth that cryptocurrency is a criminal’s safe haven.

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Cross-chain bridge RenBridge laundered $540M in hacking proceeds: Elliptic

August 11, 2022 Coin Telegraph

Cross-chain bridge RenBridge laundered 0M in hacking proceeds: Elliptic

blockchain bridges

The blockchain forensics firm said cross-chain bridges provide an "unregulated alternative" to exchanges for transferring value between blockchains.

Cross-chain bridges have been the target of more than a few hacks this year, but new data from blockchain analytics provider Elliptic alleges one has been used to launder over half a billion dollars in ill-gotten crypto assets.

According to an Aug. 10 report, crypto bridge RenBridge has facilitated the laundering of at least $540 million in proceeds of crime since 2020 through a process known as chain hopping — converting one form of cryptocurrency into another and moving it across multiple blockchains.

Elliptic said that decentralized cross-chain bridges provide “an unregulated alternative to exchanges for transferring value between blockchains.”

Rogue states and hacker groups

For the most part, cross-chain bridges or blockchain bridges are used for legitimate purposes, enabling users to move cryptocurrencies seamlessly across blockchain networks.

Users typically deposit their tokens from one chain to the bridge protocol, which is locked into a contract, then the user is issued the equivalent of a parallel token in another chain.

However, Elliptic noted these bridges have also been used by ransomware gangs, exploiters, and hackers to launder proceeds of crime, with RenBridge accounting for at least $540 million of laundered proceeds since 2020.

Most recently, at least $2.4 million in crypto assets stolen during the Nomad hack on Aug 2 went through the cross-chain bridge, according to the firm.

Elliptic also noted that assets from decentralized finance (DeFi) services worth at least $267.2 million have been laundered using RenBridge in the last two years, while a portion of the $80 million stolen from Liquid Global exchange last year, allegedly by North Korea, has passed through RenBridge.

The Conti ransomware group, which famously attacked the Costa Rican government back in June, has also laundered over $53 million through RenBridge so far.

Authorities concerned

Elliptic noted that blockchain bridges such as RenBridge poses a challenge to authorities trying to clamp down on individuals and groups using the emerging technology for illicit activities.

"Blockchain bridges such as RenBridge pose a challenge to regulators since there is no central service provider that facilitates these cross-chain transactions," it said.

In a Jun. 30 status report from the Financial Action Task Force (FATF), the intergovernmental organization highlighted increasing risks associated with "chain hopping," particularly in the DeFi space:

“The rapid growth and evolution of the Defi sector is a cause for concern as it could cause risks to accelerate and proliferate.”

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Financial Action Task Force

Rogue states and hacker groups

Authorities concerned

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