MASSIVE Threat To CRYPTO?! FATF’s Travel Rule Explained!!

Just recently PayPal announced that it Would be preventing its UK users from Buying BTC until early 2024. why should You care you may ask well the reason why PayPal did this was reportedly because Of the financial action task forces So-called travel rule which requires all Crypto companies to collect detailed Info about crypto transfers the travel Rule is set to go into effect in the UK On the 1st of September and it's in the Process of being rolled out around the World This could have a profound impact on Crypto companies and projects everywhere That's why today we're going to tell you About the travel rule when it's coming To your country and how it could impact The crypto Market this is a video you Don't want to miss Okay let's start as ever with a bit of Background the financial action task Force or fat f is an unelected and Unaccountable international organization Based in Paris France It was created by G7 countries in 1989 To combat money laundering but its scope Has expanded significantly since then Now if you watched our first video about The fat F you'll know that the Organization adopted a mandate in 2019 To quote combat any threats to the Integrity of the financial system you'll Also know that the fat F considers

Crypto to be a threat probably because Its purpose is to replace the financial System If you watched our second video about The fat F you'll know that the Organization started applying its So-called recommendations to the crypto Industry in 2019 you'll also know that Any country that refuses to go along With these recommendations finds itself Cut out of the International Financial System If you watched our third video about the Fat F yep we've covered it a few times You'll know that these recommendations Have apparently done absolutely nothing To combat illicit Financial activity Over the last 30 years you'll also know That the organization finalized its Recommendations for cryptocurrency in October 2021 This by the way is our fourth video About the fat f Now to refresh your memory the fatf's Crypto recommendations involve labeling Everything that doesn't involve a third Party as high risk this includes holding Your crypto in your own wallet and Sending crypto peer-to-peer and the fat F also considers any kind of crypto Privacy to be inherently high risk too Now if these recommendations are Implemented as regulations then crypto Will effectively become another arm of

The existing Financial system it will Offer no Financial Freedom and no Financial privacy The Only Exception appears to be nfts Which are exempt from these Recommendations for unknown reasons on That note you should know that the fat Apps crypto recommendations only apply To intermediaries working with crypto Which the fat F refers to as virtual Asset service providers or vasps The fatf's crypto recommendations do not Apply to miners validators or crypto Wallets at least not yet I say not yet Because the scope of the fatf's Recommendations seems to have expanded Over time this is especially true of the Travel rule which requires vasps to Collect kyc on everyone who buys or Sells more than one thousand dollars Worth of crypto This is why crypto exchanges started Collecting kyc in 2021 since that time However the travel rule seems to have Expanded to require vasps to essentially Collect kyc level information about Crypto transfers to and from vasps that Are worth more than one thousand dollars Note that it's not entirely clear when The scope of the travel rule was Expanded our research suggests that this Expansion happened after the fat F's Finalized crypto recommendations were Published in October 2021

Some of you may recall that South Korean Crypto exchanges started forcing their Users to provide kyc type information For crypto wallet transfers in December 2021 What's fascinating is that some Countries seem to have pushed back Against the expanded travel rule you Might remember that the UK announced That it would not be forcing vasps to Track transfers to and from crypto Wallets last summer stating that crypto Wallets did not pose any illicit Activity risks What's terrifying is that these Countries notably the UK seem to have Pulled a 180. as I mentioned in the Introduction the UK is going to Implement this expanded travel rule Starting from the 1st of September the Announcement specified that it did this As a response to an announcement by the Fat F back in June The fancy F announcement in question Called on all countries to implement its Crypto recommendations as regulations Quote without further delay of course This is not a recommendation it's a Demand comply with our crypto Recommendations or we will restrict your Access to the Global Financial system it Appears that some countries were unable To comply so they had to ban crypto the Two countries that come to mind are

Pakistan and Kuwait both of which Recently banned crypto in its entirety Citing the fat F's crypto Recommendations as the reason it appears That the UK opted to comply instead So this begs the question of when the Fat F's expanded travel rule is coming To your country obviously the answer Depends on the country a full list of Countries and their compliance with the Expanded travel rule can be found on the Website of notabene a crypto compliance Company link will be in the description If you take a look at the list you'll Notice that some have already Implemented the travel rule the catch is That not all of them have implemented The expanded travel rule to find out You'll have to click the link on your Country and look at the details There's only one country we really need To look at though and that is the United States that's because the fat F seems to Be heavily influenced by the US the Travel rule has its roots in the US's Bank secrecy Act Kyc for financial transactions has its Roots in the infamous Patriot Act The fataf's finalized crypto Recommendations were even co-authored by The U.S treasury Department as such it's Safe to assume that the fatf's crypto Recommendations are likely to mirror Similar regulations that are being

Proposed or that have already been Passed in the United States it seems That the fataf's expanded travel rule Itself has its roots in an Infamous Fincen proposal from November 2020. The Proposal in question was to basically Lower the travel rule transaction Threshold from 3 000 US dollars to just 250 US Dollars and expand its scope to Include any transactions involving Crypto I.E transfers between crypto Wallets and vasps such as exchanges Fortunately this proposal has yet to be Approved unfortunately it seems that the U.S has influenced the fat F to Implement this proposal in other Countries instead that's because the Travel rule transaction threshold in Jurisdictions like the European Union is Zero something the fat F had actually Suggested in its finalized crypto Recommendations This is more significant than you might Think because it suggests the start of a Very slippery slope first the fat F just Wanted vasps to complete kyc on their Users now they want vasps to get info on Crypto transactions above a certain Value eventually they'll require vasps To get info on all crypto transactions And the countries that don't force vasps To comply will be cut out of the Global Financial system This ties into the question of why some

Countries such as Kuwait and Pakistan Are Banning crypto instead of complying With the fat F like other countries such As South Korea and the UK The answer is likely because they don't Have the resources required to comply With these recommendations take a second To consider that information about all These travel rule transactions will have To be shared with national Regulators in Turn these National Regulators will have To make sense of this massive amount of Information and understand which Transactions could be elicited and which Ones are legit on the off chance that They fail to do this to the standard That the fat F wants then they could Just as easily find themselves on the Fat F's gray list or even Blacklist in Other words the outcome of attempting to Comply will be almost the same as Outright non-compliance so why bother Trying to comply not only that but it's Possible that the US would use this Alleged non-compliance as justification To punish its geopolitical opponents for Context it's believed that up to 40 Percent of money laundering takes place In the United States and yet its Countries like the UAE that are ending Up on the fat F's naughty lists Given this Fact one could argue that the Primary purpose of the fat f is Geopolitical not regulatory if this is

The case then it's truly terrifying Because it means that the US is using The fat F to push its own allies to Comply remember that the UK initially Wasn't going to apply the fat F's Expanded travel rule This relates to the question of why any Country would take the risk of complying With the fat F's crypto recommendations Instead of just Banning crypto well the Answer is probably profit crypto has Unprecedented potential and there are Literally dozens of countries trying to Capitalize on this by becoming crypto Hubs the Paradox here is that the Fataf's expanded travel rule alone is Likely to be enough to crush smaller Crypto companies and startups that's Because they just wouldn't have the Financial resources needed to comply This would mean that the large crypto Companies left standing could become Monopolies at that point it would be Very easy for the fat F to expand the Scope of its crypto recommendations Again to completely Outlaw self-custody Peer-to-peer transactions and crypto Privacy again this would turn crypto Into another arm of the existing Financial system albeit much more Dystopian The Silver Lining is that this outcome Is years away from occurring and by no Means guaranteed it could also be

Beneficial to the crypto Market in the Short to medium term That's simply because institutional Investors will likely invest more in Crypto once all these fat f-based Regulations are in place this is just a Consequence of the fact that crypto Would become ever so slightly more Integrated with the existing Financial System at least from a regulatory Perspective this means more crypto to Fiat on and off ramps more funding for Crypto projects and companies and a lot More direct crypto investment the Consequence of this is that crypto would No longer become a niche asset class and The consequence of that is that Self-custody and peer-to-peer Transactions would become more common Now under normal circumstances this Would result in an explosion of Crypto-specific innovation like new D5 Protocols for instance Under the fat F's recommendations However any crypto projects or companies Offering these kinds of Innovations Would come under extreme scrutiny unless They're perfectly decentralized the fat F will label them all as vasps and force Them to comply with recommendations like The travel rule as well believe it or Not but this will also be beneficial to Crypto because it will force new crypto Projects and protocols to be as

Decentralized as possible in order to Outmaneuver the fat F make no mistake This will be painful in the short term Because crypto projects and companies Are not very decentralized and if you're Wondering what decentralization means be Sure to check out our video about that In the description now that said if any Truly decentralized crypto projects and Protocols managed to gain significant Adoption the fat F would likely respond By further expanding the scope of its Crypto recommendations speaking of which Notabene noted in a recent report that The fat F left the door open to this Possibility quote Transfers between self-hosted wallets So-called peer-to-peer P2P transactions Are not explicitly covered by AML CFT Rules the fat F opens the door to a Future Paradigm change in case there is A distinct Trend towards P2P Transactions translation if true Cryptocurrency that is peer-to-peer Trustless transactions becomes too Popular then the fat F would respond by Saying wallets that engage in crypto Activities are high risk in Practical Terms this could mean not being able to Transfer crypto between such wallets and A compliant vasp what's funny is that This would likely result in the creation Of a parallel Financial system which is Exactly the opposite of what the fat f

Is trying to achieve with its crypto Recommendations Now by this point you're probably Wondering what the crypto industry is Doing about the fat F's crypto Recommendations well at first glance it Looks like it's complying upon closer Inspection however it appears that this Compliance has been incredibly strategic Allow me to explain For starters it seems that the crypto Industry took its sweet time in Complying with the fatf's crypto Recommendations this makes sense because Compliance is an additional cost and Most countries were not pressuring them About compliance with the fat F until Recently for reference there are Technically no deadlines for compliance With the fatf's recommendations in Theory countries need to apply the Fatf's recommendations within one year Of their announcement in practice most Countries don't just 10 percent had Implemented the crypto travel rule in 2022 To be fair this apparent non-compliance Wasn't intentional the fat F has Constantly been adjusting its crypto Recommendations to account for changes To the crypto industry it was only after The finalized crypto recommendations Were published that everyone started Taking them seriously

This includes the crypto industry which Notabene found quote seemed willing to Adopt the travel rule in January 2022 by That point some of the biggest entities Had already started exploring travel Rule compliance like usdt issuer tether And its Sister Exchange bitfinex working With notabene Here's where things get interesting now To Bene the aforementioned crypto Compliance company has been referenced By the fat F on a few occasions this is Somewhat surprising considering that the Company has received most of its funding From the crypto industry at least According to crunchbase Some of you may know that we asked Notabene what criteria they use to Determine which crypto transactions are Considered high risk from the fat F's Perspective for one of our previous Videos They said that they do not decide this This is determined by blockchain Analytics companies now if you watched Our video about blockchain analytics Companies you'll know that the largest One is chain analysis and it is Surprisingly Pro crypto in fact the Analysis actually pushed back against The fat F's crypto recommendations when They were first proposed way back in 2019 In case you haven't put two and two

Together it appears that the Institutions the fat f is relying on to Implement its crypto recommendations are All pro crypto to put things into Perspective companies like notabene and Chain Alice's have been advising Governments and Regulators put Differently the impact of the fatf's Crypto recommendations may not be as Anti-crypto as they intend them to be Because all the institutions required to Implement them are pro-crypto it's not Just private companies either as we've Seen with the UK some countries are Trying to protect crypto too There's only one place where the fat F Could still cause a problem and that's Privacy for those unfamiliar Financial Privacy is required for Financial Freedom that's because if every Transaction is tracked then you can be Coerced in many ways Say by punishing The people you transact with logically It's going to be very difficult for pro Crypto compliance companies and Countries to defend crypto privacy from The fat f This will be practically impossible when The fat F decrees that any exchange Offering privacy coins is inherently Non-compliant this could result in the Elimination of crypto privacy altogether Some would say that the recent sanctions Against tornado cash are a Prelude to

The fat F's next moves luckily it Appears that the crypto industry has Been working on a solution to this too Some of you may know that the fataf Claimed that there'd been a huge move Towards privacy in crypto in its Finalized recommendations This didn't make much sense to us at the Time but it makes perfect sense now Besides the fact that many crypto Projects such as ethereum have been Trying to preserve privacy through the Use of cutting-edge Technology like zero Knowledge proofs Bitcoin has also been Subtly working on privacy preserving Technology too some of you might Remember the Taproot upgrade from November 2021. one of the things Taproot Did was introduce key aggregation with Schnor signatures in plain English it Made it so that every single transaction On bitcoin looks like a regular Transaction this means that transactions Involving multi-sig wallets look like Regular transactions on the blockchain This is significant because multi-sig Wallets are required for Atomic swaps Swapping BTC for a crypto coin on Another blockchain As it so happens Monero developers Finally found a way to execute Atomic Swaps between BTC and XMR in August 2021 Taproot means these swaps are now Theoretically undetectable

Multi-sig wallets are also required for The lightning Network bitcoin's largest Layer 2. as it so happens U.S Authorities offered bounties to anyone Who could track XMR and lightning Network transactions in September 2020 This implies that the lightning network Has similar privacy levels to Monero now Here's the crazy part the three Bitcoin Improvement proposals that make up the Taproot upgrade including snore Signatures were all proposed in January 2020 shortly before the first countries Started implementing the crypto travel Rule this could be nothing more than a Coincidence or perhaps something more Anyway speculation aside it's clear that Crypto privacy is inevitable That's Because nobody wants privacy more than High net worth individuals when these Investors get involved during the next Crypto bull market there will definitely Be cause to increase crypto privacy and Many of these calls will be answered and If these calls somehow don't come from The one percent you can bet that they'll Come from the central banks that will Start accumulating crypto come 2025. if You haven't heard about that yet be sure To check out our video about it using The link in the description And that's about all for today's video Folks if you found it informative smash That like button to let me know if you

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