A group of crypto companies, including Robinhood, Circle

A coalition of US crypto-firms unveils TRUST, a travel rule compliance platform.

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  • A group of US crypto companies has developed a centralised solution for the information sharing requirements in the travel rules.
  • TRUST is the solution. It’s a platform that members can use to securely transfer customer information.
  • The group intends to expand the global reach of the solution over time.

A group of the largest crypto companies in America is working together to develop a solution for increased anti-money laundering standards.

Crypto firms can securely collect and transmit customer information using the so-called Travel Rule Universal Solution Technology (or “TRUST”).

In its finalised guidance, the Financial Action Task Force suggested that participating countries implement a travel policy for virtual asset service providers (VASPs), which are basically entities that facilitate transactions. The travel rule is intended to prevent money laundering and terrorist financing. It requires VASPs to gather and transmit names, account numbers, and location information for both the sender and recipient of a transaction.

Although the travel rule has been a part of banking history for a long time, crypto did not have the infrastructure necessary to implement it until recently.

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A group of top crypto players in America has now created TRUST. The founding members include Avanti, Bitgo, and BitFlyer, as well as Bittrex, BlockFi, and Circle.

Coinbase is the leader of the coalition and announced a whitepaper for a peer-to-peer information network managed by a governance body made up of participants. Trust is the end result. According to Anchorage’s head of compliance, Jennifer Lee, even though Coinbase initiated the effort, all members are equally involved and have a say in the decision-making process.

The solution

This solution allows information between platform members to be sent directly through encrypted channels. It allows financial institutions to prove that they are the intended recipients of customer information by proving proof of address ownership.

In the white paper he published in 2020, Jeff Horowitz, former chief compliance officer at Coinbase, described the solution as a “centralized bulletin board.” VASPs could post addresses to the bulletin board in order to find out who owns them in transactions. If another institution claims an address, they can exchange information.

The VASP must be admitted to TRUST in order to use the solution. This will require a third-party compliance audit and all members of the current group to agree that the entity should be admitted. The group currently has 18 members. However, there are plans for expansion, even outside of the US.

Lee stated that the timeline of each member for integration with the solution will be different. Lee said that there would be a gradual rollout of the solution across all of our members. Then we would have Canadian members who live outside the US.

The solution can be modified to meet local standards as other jurisdictions determine their travel rules. Given that many jurisdictions are still working out their travel rules, it’s not clear how this will turn out.

Centralized approach

The group will need to expand its decision-making process as it adds members. As the group is still in its initial stages of integration, it’s not clear what this governance model will look like.

Others propose a more decentralised solution to travel rules. Technology can be used by everyone, not just a few firms who decide who can transact. A decentralised solution has been supported by those who are concerned that, if only a few can transact compliantly, funds could be excluded from the compliant environment. According to TRUST’s announcement, it is still aiming to broaden adoption and will provide “comprehensive compliance throughout the crypto industry.”

Lee stated that the benefit of a central solution is greater security and due diligence around who receives a user’s personal data.

Anytime travel data is transmitted to the blockchain, it will be practically readable by the public,” she stated. “That’s why we must move it into the network of our members who have been verified and on whom we have done due diligence to ensure that this information is being stored by trusted people.”

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