Coinbase Joins Robinhood, Fidelity and Others to Fight Crypto Crime

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  • According to a new Chainalysis report, $8.6 billion in crypto was laundered by cybercriminals in 2021, a 30% increase over the prior year.
  • Coinbase and other fintech organizations developed a way to comply with federal rules, automatically linking sender and receiver info with crypto transactions of $3,000 or more.
  • Recent beta tests were successful, and the system is scheduled to launch by the end of the year.

The fintech consortium developed a programming solution linking personal information with crypto transactions of $3,000 or more to comply with anti-money laundering rules.

Editorial Update

On June 6, 2023, the Securities and Exchange Commission (SEC) filed a lawsuit against Coinbase, stating that the company had facilitated the buying and selling of crypto securities. For additional information, check out our coverage here.

According to a new report from blockchain tracking firm Chainalysis, the amount of cryptocurrency laundered by cybercriminals was more than $8.6 billion in 2021. That's a 30% increase in money-laundering activity over 2020. According to the report, more than $33 billion in crypto has been laundered since 2017. Compliance with federal rules is becoming more important to counter this criminal conduct.

Coinbase and a group of fintech companies unite to fight money laundering

A group of well-established firms active in cryptocurrencies in the U.S., including Coinbase, Fidelity and Robinhood, have joined to bring digital assets in step with global anti-money laundering (AML) rules. A key component of those AML requirements is the Financial Action Task Force’s “Travel Rule,” which says all crypto transactions above a certain amount must be accompanied by identifying information.

In a recently published advisory statement, a U.S. regulator, the Financial Crimes Enforcement Network (FinCEN), outlined the details of the "Travel Rule" requirements. The rule, FinCEN says, applies to "transmittals of funds equal to or greater than $3,000 (or its foreign equivalent)." It doesn't apply to "transmittals of funds governed by the Electronic Funds Transfer Act or made through ATM or point-of-sale systems."

The rule requires senders' financial institutions to include:

  • Transmitter's name
  • Transmitter's account number, if used
  • Transmitter's address
  • Transmitter’s financial institution
  • Transmittal order amount
  • Transmittal order execution date
  • The recipient’s financial institution

And recipient transactions must provide:

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  • Recipient's name
  • Recipient's address
  • Recipient's account number
  • Any other specific identifier of the recipient

This data is referred to as "personally identifiable information" (PII) and the PII "travels" with the crypto transaction, hence the law's name. There have been a number of proposed ways to accommodate "travel rule" PII-sharing requirements in pseudonymous-by-design cryptocurrency transactions.

This latest collective effort brings together 18 virtual asset service providers (VASPs), participating in the launch of the Travel Rule Universal Solution Technology (TRUST). The newly formed TRUST platform was announced Wednesday. And in a pileup of acronyms, it was created in response to AML data-sharing requirements recommended by the Financial Action Task Force (FATF) and FinCEN.

Members of TRUST have programmed an initial solution to automatically comply with the Travel Rule, and recently completed successful test runs. The first transactions sent among five VASPs used dummy PII data. The TRUST group plans to deploy actual customer PII with crypto transactions by the end of the year.

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