Travel Rule Research (Code X Catalyze Research)

Introduction

- The year 2023 is shaping up to be a pivotal point in the development of the legal framework and regulatory environment for cryptocurrencies. At the center of these changes are not only business rights laws, but also cryptocurrency Travel Rule, and countries' strategies for responding to them are gradually taking shape.

- At its February meeting, the Financial Action Task Force (FATF) revealed the status of implementation of the crypto Travel Rules it published in 2019, and found that about 75% of member countries have not yet actively implemented them. As a countermeasure, it announced that it will disclose the status of each country's implementation of the Travel Rule in the first quarter of next year and sanction them if necessary. In addition, the communiqué of the G7 summit held in Japan on May 13, 2023, included support for the FATF's cryptocurrency Travel Rule. These developments are expected to further strengthen international pressure on crypto regulation.

- The European Union (EU) is playing a pivotal role in driving this overall trend. On April 20, 2023, the EU approved the Markets in Crypto Assets Regulation (MiCA) and the Transfer of Funds Regulation (TFR), a unified regulatory framework for crypto assets, and on December 30, 2024, the regulations will be fully implemented in EU member states. As a result, the EU's regulatory policies are expected to have a global impact.

- In this report, we analyze the international and domestic trends of crypto assets through data from Catalyst Research, referring to the FATF's call for the implementation of travel rules, the G7 summit, and the EU's implementation of Travel Rule. This report aims to provide insights into policy changes and global market trends related to travel rules for cryptocurrencies.

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Research data collection and analysis period

From January 1, 2019 to July 31, 2023, we collected and analyzed Travel Rule and TFR-related mentions from news, media, forums, and social media channels in more than 200 countries and 150 languages.

Methodology :

1) Word cloud: Text data from various feeds, posts, comments, etc. were analyzed using a word cloud technique to visually derive keywords and topics.

2) Peak Drivers: Analyzed spikes in mentions to identify hot issues or trends.

3) Deep learning-based sentiment analysis: Leverage natural language processing techniques to identify detailed trends in positive or negative reactions to text data.

4) Time series analysis: Visualize mentions and reactions over time to identify popular trends for specific topics or keywords.

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Travel Rule Overview

1. Purpose of the Travel Rule

The Travel Rule is a key AML/CFT tool for crypto businesses and financial institutions that aims to prevent or (if already occurring) detect the use of wire transfers by terrorists, money launderers, and other criminals to move funds. Specifically, Travel Rule provides basic information about senders and receivers that can be used to.

1) Law enforcement to detect, investigate, and prosecute terrorists and other criminals or trace their assets.

2) Financial intelligence analysis organizations to analyze suspicious or unusual activity.

3) Enabling sending, intermediary, and receiving VASPs and financial institutions to identify and report suspicious transactions and freeze funds or prevent transactions with sanctioned individuals and entities.

(Source : FATF Recommendations, Interpretive Note to Recommendation 16)

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2. Travel Rule Legislation and Enforcement Trends

1) June 2019. Following the release of the Financial Action Task Force (FATF) Recommendations on Travel Rule for Virtual Assets, Travel Rule legislation and enforcement has been underway in countries around the world, including South Korea.

2) April 2023. The passage of the EU's MiCA legislation and Transfer of Funds Regulation (TFR) accelerates the pace of Travel Rule legislation and implementation in global markets.

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3. Travel Rule Legislation in Key Countries

1) (Singapore) January 28, 2020, Notice PSN02 PREVENTION OF MONEY LAUNDERING AND COUNTING THE FINANCING OF TERRORISM) guidelines came into effect

2) (Japan) July 1, 2023, amendment to the Act on Prevention of Transfer of Criminal Proceeds (APTCP) to make Travel Rule mandatory.

3) (Hong Kong) On May 25, 2023, the AML/CTF Guideline for SFC-licensed VASPs was published. Guideline effective June 1, 2023.

4) (EU) On April 20, 2023, the EU's MiCA and TFR, standalone legislation on virtual assets, were passed. Traveler Rule will be required from January 2025.

5) (UK) On July 1, 2022, amendments to The Money Laundering and Terrorist Financing (Amendment) (No. 2) Regulations 2022 were published. Travel Rule will be mandatory on September 1, 2023.

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Word Cloud and top topics around Travel Rule : Word Cloud and Featured Topics

- FATF Keywords Emphasize Travel Rule Compliance for Exchanging Sender and Receiver Information for Cryptocurrency Transfers Between VASPs

- Travel Rule word cloud focused on FATF keywords: Emphasis on Travel Rule compliance between VASPs (the sender and the recipient exchange information) when transferring virtual assets

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Sentiment Trends for Travel Rule in Q1-Q2 (2023)

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Trends in domestic and international mentions of Travel Rule

- The domestic market has shown early interest as the first global adopter of the Travel Rule.

- Global markets begin to see a spike in mentions as the EU expands and introduces MiCA and TFR legislation.

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Interest in crypto Travel Rule by country

- Country-specific interest is growing, depending on the state of Travel Rule regulations in each country.

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Interest in Travel Rule surges top topics by country

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Summary

1. Global interest in Travel Rule is growing as the number of countries implementing Travel Rule increases

1) FATF and EU emphasize compliance with Traveler's Rule, which requires the exchange of sender and recipient information for crypto transfers between VASPs.

2) As travel rules become more widespread, the market is more concerned about their anti-money laundering capabilities than they are about their benefits

3) National interest has increased significantly with the implementation of the Travel Rule regulation.

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2. AS each country’s Travel Rule regulations differ, it is necessary to continuously F/U the global regulatory status

1) Many global countries such as South Korea, Japan, and the EU are refining and expanding their Travel Rule legislation.

2) Each country has a different implementation date, threshold amount, and requested exchange information so it is necessary to keep track of the regulatory status.

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3. Global Travel Rule solution providers are expected to increase their interconnection with each other to respond to the introduction of regulations in each country

1) Solution integration between localized solution providers is expected to expand to comply with global Travel Rule regulations.

2) As a global travel solution provider, CODE has been expanding its services to respond to Travel Rule in each country, and already provides interworking services with other travel solution providers.