Regulation - the FATF travel rule

Moralis General
#1

Hi guys does anybody have any experience with FATF travel rule? As it seems if you run a DEX or even any other service that uses a smart contract you are considered as a Virtual Asset Service Provider (VASP).

This means without any permit you are prohibited to run any DApp platform. I checked a lot of sources and they all tell the same. Is there anybody who know something about this stuff already?

This seems to be really serious. Because All sources tell you in common that any interaction with wallets is considered as you being a VASP. This has a huge impact on the development of any stuff in DeFi, NFT or whatever.

Virtual Asset Service Providers Virtual asset service provider means any natural or legal person who is not covered elsewhere under the Recommendations, and as a business conducts one or more of the following activities or operations for or on behalf of another natural or legal person:

i. exchange between virtual assets and fiat currencies;
ii. exchange between one or more forms of virtual assets;
iii. transfer1 of virtual assets;
iv. safekeeping and/or administration of virtual assets or instruments enabling control over virtual assets; and
v. participation in and provision of financial services related to an issuer’s offer and/or sale of a virtual asset.
[1.] In this context of virtual assets, transfer means to conduct a transaction on behalf of another natural or legal person that moves a virtual asset from one virtual asset address or account to another.

source: https://www.fatf-gafi.org/glossary/u-z/#:~:text=Virtual%20Asset%20Service%20Providers&text=In%20this%20context%20of%20virtual,address%20or%20account%20to%20another.

There are many services offering APIs to meet this regulatory rules. But there is nothing transparent about the real costs of that.

Best
Benjamin

#2

these so called Recommendations by a NON GOVERNMENTAL AGENCY should be mostly ignored.
Because they mostly have not been implemented and do not over ride your local laws.
Such thing are only to be relevant if there is some kind of big money laundering crime ring investigation .

First Strive to make Trillions Legally and then pay fines for your errors after wards.

Crptographic Key Pairs can be used for lots more than Wallets and really DeFi is more using your keys as login credentials and proving signing authority.
Clearly the regulators have no clue about this. or any other implementation in crypto or code on any level.

most importantly with defi, you are provably never handling anyone elses assets.
the point is be smart about how you do things

1 Like
#3

The draft guidance notes that “exchange or transfer services” are often provided through “so-called decentralized exchanges or platforms” and that DEXs and DApps “still usually have a central party with some measure of involvement, such as creating and launching an asset, setting parameters, holding an administrative ‘key’ or collecting fees.” The guidance clarifies that a DApp itself is not a VASP because the FATF’s standards “do not apply to underlying software or technology,” but it goes on to state that “entities involved with the DApp may be VASPs under the FATF definition” and adds that owners/operators of DApps are “likely to be a VASP even if other parties play a role in the service or portions of the process are automated.” However, it is not entirely clear how FATF’s approach would apply to a DEX or DApp that did not have any “central party” or whether the organization believes such a model can even exist. Nor is it clear whether the draft guidance fully comports with guidance on DEXs and DApps issued by the United States’ Financial Crimes Enforcement Network (FinCEN) in 2019, which addresses both topics, but in a manner that has continued to create some confusion for industry.

Anyways I want to clearify this with a lawyer. I will share more details here.

#4

Are you serious :smiley: ?

#5

Absolutely serious.
dont be so naive
notice that no capitalist giant has been regulated until after they made billions.
all the bank cartels are out right criminals.
Welcome to your crooked government
the thought police are after you next

Which part of Ripple being sued by SEC and not ignoring them but telling them to go shove it and that Ripple is instead doing IPO on the stock market.

here is what the other filthy rich people do, the setup business registration and operations in a country with out a criminal govt
oh wait, there are none, which is exactly why crypto exists in the first place.

#6

As I mentioned I totally get your point. But also I wish that the crypto space becomes more professional. From a users perspective its reasonable to not only get a fully regulated service by perhaps criminal governments. But also in a way they know that the service party is somehow responsible for the offered services. Even if you act only as a gatekeeper. Users don’t understand the difference. And thats why such things like rugpulls can happen.

And I totally agree with you on the behalf of governments and huge companies. But we should not always think that crypto will democratize the world in a better way. Things are just in a different form not in a totally different way.

Anyways I keep this thread up to date with regulatory information I will get. I am talking right now to SaaS providers for this legal stuff. They want to provide me also details about costs and how it will work.

#7

keep in mind how the regulations are different for every country.

if you start your project by talking to regulators or any SaaS Corp you will only be presented with the most expensive way to go about ensure you first pay them all their consulting fees and all kinds of other unrelated to dev expenses and try to compel you to spend huge amounts of money on things that you actually dont need.

SaaS is a compete corporate scam it is all about singular central market control and is the antithesis of DeFi

taking the approach you mention above is pretty much a guarantee that your project never gets off the ground because it prevents you from focussing on what is most important, which is demonstrate a Proof Of Concept or you are wasting time on a fantasy.

if what you make is genuinely useful and others can use it to make money, investors will come by to pay for what ever it takes to operate within the regulations.
you are way too early in developement to concern yourself with regulations.

there is nothing in crypto that has ever been setup based on regulations.
From the beginning it has been done despite the regulations and to find new ways around corrupt regulations starting with excluding involvement with the regulators.

When push comes to shove, we shall set up a registration in a legal jurisdiction that is outside the jurisdiction of G20 Governments and not required to cooperate with their regulatory guidelines that are not even real laws.

I learned a lot working as Law Firm Accounting tech support, it is Trust Accounting just like banks. I am directly familiar with the fiduciary duties of handling other peoples money in trust, like lawyers and banks and investment companies do.

The whole reason DeFi exists is because of the regulatory problem of 3rd party money handling service providers.

the DeFi Solution is to NEVER hold anyone else’s money but your own
A Decentralized Exchange by passes a whole range of regulations because they never handle other peoples money and are not able to bill anyone for any money handling services because they never touched it.

It is the Legally Suave Solution to the existing broken regulations issues.

If you want high level corporate registrations with lawyers and expensive accountants to file your yearly taxes, then you do what PolkaDOT and others have done.
First you go set up a Foundation.
Second the foundation sets up a wholly owned for profit company .
now you have ‘Legally Implemented’ protections from regulators and tax authorities
where smart money managers guarantee your for profit company has no net profit to pay tax on and all earnings are redirected to the foundation treasury.

fair enough, they stated with Gavin Wood and millions of dollars investment upfront.

demonstrate proof of concept and worry about regulators when there is a million dollars in your personal bank account they might decide to seize under false charges of wrong doing.