The OpenVASP protocol – a remedy to the travel rule whilst protecting client privacy
The OpenVASP initiative, launched in November 2019, aims to provide an open-source, decentralized solution for Virtual Asset Service Providers (VASPs) to comply with international AML requirements and one of the biggest regulatory challenges, known as the Financial Action Task Force’s (FATF’s) Recommendation 16 “Travel Rule.” In June of 2019, the FATF confirmed that this rule would apply to VASPs.
What is the important rule requirement? Any VASP mustobtain, 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, also known as the travel rule," according to a press release.
In an effort to meet this challenge, the OpenVASP initiative launched several months later, in November 2019. Sygnum, the world’s first regulated Digital Asset Bank has joined forces with five Swiss-based entities, in committing resources towards the development of a working, technical implementation of the OpenVASP protocol vision; in December 2019. The industry-led working group integrated 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 (1) when creating the open protocol; which primarily seeks to facilitate compliance with FATF’s travel rule for virtual assets. The establishment and guidance of the principles indicate a comprehensive approach to the protocol – providing challenge and resolution for key areas of; implementation feasibility, data transfer privacy, decentralization and technology flexibility; in addition to the core target of ensuring compliance with the FATF Travel Rule.
What is the benefit of this protocol? It offers a digital asset-agnostic approach and also 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 meant as a 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 AG stated during the OpenVASP panel at Davos this year:
“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 funding members are eight contributors to the initiative, with presence in Australia, Hong Kong, Japan, Korea, Singapore, Switzerland and Taiwan.
Emphasizing the importance of the ever evolving regulatory landscape, strong digital asset community, working towards common standards in complying with regulatory rules and best practises, whilst not compromising client information privacy.
A core pillar to Sygnum’s values is that of Trust. The team at Sygnum empower their clients to invest in the digital asset economy with complete trust. This key principle of trust is echoed in Sygnum’s contribution to the OpenVASP initiative; focusing not only on compliance, but also the client’s best interest and their trust in Sygnum providing them with compliance solutions, with guaranteed privacy protection.
As Sygnum continues to shape the development of a global, scalable and adaptive digital asset ecosystem, we will regularly contribute to the open-source development of OpenVASP. Sygnum looks forward to embarking on this journey.