OpenVASP protocol – a remedy to the travel rule while protecting client privacy
The OpenVASP initiative, launched in November 2019, provides an open-source, decentralized solution for Virtual Asset Service Providers (VASPs) to comply with the Financial Action Task Force’s (FATF’s) Recommendation 16 “Travel Rule. In June 2019, the FATF confirmed that this rule would apply to VASPs.
The central requirement of the rule is that any VASP must obtain, hold, and transmit originator and beneficiary information when conducting virtual asset transactions with obliged entities as defined by the FATF (other VASPs, banks and financial intermediaries).
The initiative will enable VASPs to transmit blockchain transaction information privately, immediately and securely, in compliance with the FATF Recommendation 16, according to the press release.
The OpenVASP initiative was launched to meet this challenge. Sygnum, the world’s first digital asset bank, joined forces with five Swiss-based entities to commit resources towards the development of a working, technical implementation of the OpenVASP protocol vision. The industry-led working group combined their collective expertise to build an initial version of the OpenVASP protocol, based on the whitepaper published in November 2019.
The protocol facilitates robust compliance for VASPs, solely based on a set of principles, regardless of jurisdiction or virtual asset, and without membership or registration with a centralized third-party.
The group were guided by seven core principles when creating the open protocol which primarily seeks to facilitate compliance with FATF’s travel rule for virtual assets. These principles represent a comprehensive approach to the protocol. In addition to the core objective of ensuring compliance with the FATF Travel Rule, the initiative also addresses key areas of best practice, including implementation feasibility, data transfer privacy, decentralization and technology flexibility.
There are a number of benefits to this protocol. It offers a digital asset-agnostic approach and facilitates robust compliance for VASPs around the world, regardless of jurisdiction or technology used, and without membership or registration with a centralized third-party. This is an important contribution to the ongoing dialogue of members of the crypto- financial community and regulators around the globe.
Sygnum Bank’s innovative use of technology continues to streamline the customer experience through the regulatory process. Sygnum Bank's involvement in the OpenVASP initiative is a clear example of their belief in industry collaboration and building networks. Gino Wirthensohn, Head of RegTech, Sygnum Bank stated during the OpenVASP panel at Davos:
The contribution of our digital asset expertise to empower the regulated, seamless transfer of digital assets between VASPs represents another positive step forward for the digital asset economy.
The OpenVASP protocol has been championed by reputable organisations, associations and exchanges across the globe. Accompanying the six founding members are eight contributors from Australia, Hong Kong, Japan, Korea, Singapore, Switzerland and Taiwan.
Within an ever evolving regulatory landscape, this emphasizes the importance of a strong digital asset community working together towards common regulatory standards and best practices, while protecting the privacy of client information.
Sygnum empowers their clients to invest in the digital asset economy with complete trust. This is echoed in Sygnum’s contribution to the OpenVASP initiative, focusing not only on compliance, but also client experience and guaranteed privacy.
As Sygnum continues to shape the development of a global, scalable and adaptive digital asset ecosystem, they will continue to contribute to the open-source development of OpenVASP.