BitFlyer, one of Japan’s prominent cryptocurrency exchanges, has recently made an important announcement that is set to impact its customers. Effective from May 30th, the exchange will only support cryptocurrency deposits and transfers from exchanges or wallets that comply with the travel rule.
The travel rule, established to curb illicit activities such as money laundering and terrorist financing, requires exchange companies to share detailed information about the remittance requester and recipient when a user requests to send virtual currency.
Supported Crypto Assets Under TRUST System
To comply with this rule, bitFlyer will restrict deposits and remittances of crypto assets to exchanges that have implemented the Travel Rule Universal Solution Technology (TRUST) system.
However, this restriction applies only to 21 countries and regions that enforce information notifications based on travel rules. Customers can continue sending and depositing virtual assets with exchanges based in countries outside this list.
It is worth noting that bitFlyer will only support certain digital assets under the TRUST system, namely Bitcoin (BTC) and Ethereum (ETH), along with ERC-20 standard tokens such as Basic Attention Token (BAT), Chainlink (LINK), Polygon (MATIC), Maker (MKR), Shiva (SHIB), and Palette (PLT).
Coincheck, another cryptocurrency exchange in Japan, is the sole exception that allows domestic remittances and deposits during this period. Presently, customers can only deposit and transfer Bitcoin between Coincheck and bitFlyer.
However, bitFlyer mentioned the possibility of expanding the trading options to include Ethereum (ETH) and other ERC-20 standard crypto assets in the future, pending Coincheck’s development.
It is essential to understand that different companies have adopted various solutions to comply with the travel rules. While bitFlyer and Coincheck utilize the TRUST protocol, other domestic companies such as GMO Coin and bitbank have opted for the Sygna Alliance system.
Currently, these two protocols are incompatible, restricting crypto asset transfers even among other licensed exchanges regulated by the Financial Services Agency in Japan.
Internationally, major US companies like Coinbase and Circle use the TRUST system. However, in Japan and the Asia-Pacific region, exchanges primarily employ Sygna, developed by CoolBitX in Taiwan.
The Travel Rule was proposed by the Financial Action Task Force (FATF) to prevent the misuse of cryptocurrencies by criminals and terrorists.
The Japanese government enacted the “Law for Partial Revision of the Law Concerning Funds Settlement, etc. to Build a Stable and Efficient Funds Settlement System” to comply with this rule by June 9th, 2011.
This revision obligates Japanese crypto-asset exchanges to provide information such as the remittance/recipient name and customer identification number before sending crypto-assets.
In light of these developments, it will become necessary for general users to verify the protocol employed by their chosen exchange and select an exchange or wallet that enables them to make compliant remittances.
As the travel rule implementation progresses, ensuring regulatory compliance will be crucial for all stakeholders in the crypto industry.
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