In its publication of June this year, the Financial Action Task Force (FATF) confirmed that virtual asset service providers (VASPs) would be required to obtain, hold and transmit the information of both the sending and receiving parties in a crypto transaction.
While such requirements were initially frowned at, it has become apparent that cryptocurrency service providers, mainly crypto exchanges would need to meet these regulatory standards for the continued existence of the industry.
To this end, a solution was needed and is now on the ground courtesy of the International Digital Asset Exchange Association (IDAXA), a body representing the interest of crypto exchange providers across different jurisdictions.
During a panel on FATF regulation at the ongoing Blockshow Asia conference, representatives of IDAXA, the Swiss-based Crypto Valley Association (CVA), ACCESS Singapore Cryptocurrency and Blockchain Industry Association along with key industry partners announced the launch of the OpenVASP initiative.
The new initiative which led by Bitcoin Suisse is now available in a whitepaper and will enable VASPs to transmit blockchain transaction information privately, immediately and securely, in compliance with the Financial Action Task Force (FATF) Recommendation 16, also known as the “travel rule.”
In a press release shared with Coinfomania, IDAXA revealed that the new OpenVASP protocol would allow exchanges from across multiple jurisdictions to transact between themselves without necessarily knowing each other and without the need to register with a central authority or database.
Key elements of the proposal include structured payment messages, end-to-end encryption, perfect forward secrecy and a smart-contract layer for VASP identity management.
Commenting on the development, Chris Gschwend, Head of the CVA’s VASP / AML Taskforce defined OpenVASP as a roadmap to FATF compliance that enables VASPs to protect private and business-sensitive data.
“We hope the community will consider it as a blueprint. Building partners are welcomed, ” he added.
Similarly, Anson Zeall, Chairman of Singapore’s Crypto Association expressed a conviction that the newly proposed OpenVASP protocol upholds the values of blockchain technology
He notably added,
“It makes sense to develop a common language, so VASPs can choose between different compliance solutions.”
As Coinfomania reported following the passage of the FATF rule, cryptocurrency exchanges have until one year to reach compliance with the latest move by IDAXA representing a step in the right direction.