Several global liquidity providers including Bitfinex, Huobi and HashKey Pro have been added to Shyft Network’s Verified Shyft Compliant Optimized Participant Exchange (Veriscope) system even as a Governance Task Force and an onboarding framework is created for the decentralized compliance platform for Virtual Asset Service Providers (VASPs).
Other global digital token businesses drafted into the network are Tether, Tokocrypto, Unocoin, Paycase Financial, and CoinHako. They all form a part of the Task Force that will explore solutions specific to the governance framework and rules around the types of information that VASPs need to provide with respect to onboarding with Veriscope in order to become recognized and discoverable participants.
Designed as a smart contract-mediated data coordination infrastructure, Veriscope seeks to provide a global discovery and validation ecosystem that will solve regulatory guidance mandated through the Financial Action Task Force (FATF).
In its June 2019 guidance, the FATF requires the Travel Rule – the mandatory sharing of Personal Identifiable Information (PII) and Know-Your-Customer (KYC) data by VASPs between transacting senders and receivers before executing transactions – be enforced as it is the case in the traditional finance space between counterparties like banks.
It follows FATF’s October 2018 adopted changes to clarify that its recommendations apply to financial activities involving virtual assets (VAs) with a particular rule requiring that VASPs be regulated for anti-money laundering and combating the financing of terrorism (AML/CFT) purposes, licenced or registered, and subject to effective systems for monitoring or supervision.
For a VASP to be recognized as discoverable to meet FATF’s demand, Veriscope will enable the making of cryptographic associations between an outgoing cryptocurrency address, the sending VASP’s public Shyft Network address and the Shyft Network public address of the VASP’s user. A VASP’s written attestation claim to the network will act as a Request for Response to other VASPs on the network for them to be able to respond to the claim using Shyft Network’s smart contract system. The response will start an off-chain communication channel that allows involved parties to share sensitive travel rule information across both counterparties.
The newly-formulated group will seek “to act as a collective to make decisions, run implementations, address interoperability challenges, and give insights into how we may be able to build regulatory requirements that reduce risk, rather than having guidance that doesn’t effectively solve regulatory challenges,” according to the Co-Founder of Shyft Network, Joseph Weinberg.
They will also “develop policies in respect of initial rules of engagement, coalition-building, onboarding and data discoverability that address potential coordination and interoperability on behalf of the global digital asset system.” They will act as the first set of data custodians on the Shyft Network and will be globally focused on collaborating to ensure future incoming guidance requirements are addressed while being a response team to policymakers and global solution providers who are working to implement travel rule systems globally.
The FATF guidance states clearly that VASPs, and other entities involved in virtual assets activities, should apply specific requirements above USD/EUR 1000 threshold transactions. Such include conducting customer due diligence; obtaining, holding, and transmitting required originator and beneficiary information “immediately and securely, when conducting VA transfers” and relevant authorities “should co-ordinate to ensure this can be done in a way that is compatible with national data protection and privacy rules.”