The Travel Rule was introduced over two decades ago, requiring financial institutions, for the first time, to send the originator and beneficiary information along with each transaction worth over $3,000. It has greatly evolved since then, and in South Africa, it will now apply to virtual asset service providers (VASPs). While many digital asset firms scramble to put their houses in order and comply with the rule, Centbee founder Angus Brown reveals that the payments company has been ready for years.
South Africa’s digital asset industry has been growing rapidly in recent years. Some studies have placed the country at the top in Africa, ahead of Nigeria and Kenya, with about 7.6 million digital asset holders (22% of the population).
Regulators were bound to take notice, and they did. Some of the top watchdogs have been closely monitoring the sector, from the central bank to the taxman. Earlier this year, they moved to include VASPs as accountable institutions under the Financial Intelligence Centre Act, laying the foundation for implementing the Travel Rule in the Bitcoin sector.
South African VASPs will now have to start positioning their operations in readiness for the implementation of the Travel Rule. But for Centbee, this has been the norm for months.
“We have been treating it as if it’s applicable in our business for the last year. So we are doing all the things we’re supposed to do and are compliant already. And so for us, being an accountable institution makes very little difference at the day-to-day level and our service to customers,” Angus reveals.
There has been opposition to the Travel Rule from some circles in the digital asset sector, the same circles who believe Bitcoin was created as a cheat code to regulations. This faction, led by the misguided belief that code is law believes that Bitcoin should exist beyond the normal financial rules.
These outlaws will likely oppose the Travel Rule in South Africa first.
“I think some of them won’t like it because they like anonymity or they like not having to capture information,” Angus acknowledges. However, he believes that most VASPs are ready to embrace the new regulations and are already working towards compliance.
Implementing the new rule will require VASPs to be mindful of preserving users’ privacy, even as they seek to be compliant, Angus added. He advises all South African firms to study the rule first and how it applies to them.
“You need to read about it and understand. Does it apply to me? When does it apply to me? How does it apply to me? Analyse it. Put the pieces together and then go okay, now what’s my plan? And do something about it. Because you cannot comply with an obligation without there being consequences,” he explained.
For Centbee, complying with the new rule was much easier than for most, as Angus and his team had the standardized Travel Rule format for Bitcoin SV to refer to. This protocol specification, published by the Technical Standards Committee of the BSV Blockchain Association, takes a deep dive into what’s required of BSV-focused VASPs to comply with the Financial Action Task Force’s requirements.
Among the key areas it delves into are the scope of the rule, including whether DeFi applications, stablecoins, and merchants are covered; the methods and concepts, including the data formatting as well as messaging flow standards, and more.
“What I would recommend is they go and have a look at that standard that the community put together. It’s got a nice introductory section on it which explains the context, gives some reference materials you can read about the implications of it and then decide what to do,” Angus advises.
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