Since mid-July, The Shyft Network has been hard at work to provide a global compliance solution, the Verified Shyft Compliant Optimized Participant Exchange, i.e. Veriscope to help Virtual Asset Service Providers (VASPs) effectively adhere to the most recent FATF recommendations.
The release was followed up with the announcement of the Veriscope Governance Task Force, whose mission is to develop the onboarding solution for Veriscope. The underlying mission of the Task Force is to create a global compliance system, by unifying major cryptocurrency VASPs together with the intent to further collaborate and find the best way forward.
The Financial Action Task Force requires VASPs to implement a variety of processes that are integral parts of traditional finance, such as the travel rule. There is a risk that the implementation of these recommendations may influence crypto users negatively, and eliminating this risk is a core tenet of the Veriscope Governance Task Force.
The Veriscope Governance Task Force
The Governance Panel
The Shyft Network has formed the Veriscope Governance Task Force with Shyft team members, advisors, contributors, existing partners - Bitfinex, Huobi, Binance, Tether, Unocoin, Hashkey Pro, TokoCrypto, Paycase Financial, and several other global exchanges. Though initially formed with ten members, the governance team will have delegations from both the most abundant global liquidity venues and smaller VASPs from different jurisdictions.
The Reason behind the Task Force Formation
The Financial Action Task Force (FATF) applied an old regulation called ‘’The Travel Rule’’ to the crypto space in June 2019 to prevent financial fraud and terrorist financing. The rule ensures that all parties handling cryptocurrencies know the origin and destination of their transactions.
According to the FATF-issued recommendations, all VASPs must share Personal Identifiable Information (PII) and Know-your-customer (KYC) data between a transacting Originator and Beneficiary concurrently with the crypto transaction.
To achieve this VASPs are expected to identify each other on the blockchain. This process poses several technical challenges, particularly for privacy-first coins such as Monero. Additional concerns regarding the security, integrity and risks of data leaks between VASPs increases the importance of approaching the challenges with utmost scrutiny.
The guidance asks that all originating VASPs must collect and maintain all required originator and beneficiary information on virtual asset transfers accurately and submit it to beneficiary VASPs or financial institutions promptly and securely.
However, the FATF has delegated finding a detailed compliance solution for KYC equivalent to the crypto industry. As Rick McDonell points out, this is where the Veriscope Governance Task Force comes into the equation.
The Role of the Task Force
The task force aims to develop a framework to uphold collaborative governance. Standard rules are designed for reliable transactions for the global digital asset ecosystem as per the FATF requirements.
Therefore the various areas it will address are:
The initial rules of engagement
Onboarding
Coalition-building
Data discoverability
Tackling interoperability challenges
“The word “governance” often implies bureaucracy. Collaborative governance is not. This is what the Veriscope Governance Task Force is about. It provides common rules for trustworthy and reliable transactions that can meet the FATF requirements”, said former Executive Secretary of the FATF, Rick McDonell.
After VASPs are fully established on the platform, the focus will shift toward growth of the network, data custody, communication with policymakers and the inclusion of other international travel rule solutions.
Once the travel rule is established on a global scale, the next step is to ensure the continued implementation and fulfillment of future guidance recommendations and changes in the expected process.
How does this serve the Crypto ecosystem?
The FATF has been incredibly patient with VASPs since 2014, when the first AML and KYC risks were identified and preliminary recommendations were published. Culminating in June 2019, FATF recommendations paved the path for the future of VASPs, an integral part of the cryptocurrency ecosystem.
Through Veriscope, each individual VASP will not only adhere to the recommendations, but will also remain in full control over their processes, decision-making, and the way they access other VASPs.
VASPs will be able to whitelist other counterparties based on public registries within Veriscope. The Shyft Network will act as an information sharing conduit between VASPs ensuring that counterparties maintain full autonomy in their operations.
How does the Veriscope Governance Task Force connect to The Shyft Network?
The Verified Shyft Compliant Optimized Participant Exchange (Veriscope) system is designed to provide smart contract mediated data coordination infrastructure. With the goal of establishing a global discovery and validation ecosystem to solve regulatory guidance mandated through the Financial Action Task Force.
Shyft Network is a public blockchain protocol aimed at developing the world’s first digital identity ecosystem that enables KYC/AML attested data transfers.
Based on the Proof-of-Work consensus algorithm, the Shyft ecosystem uses SHFT gas token to power transactions. It employs zero-knowledge proof for secure, frictionless transactions, and Shyft Bridge (dubbed Byfrost) to enable interoperable, cross-chain asset transfer and management. Additionally, it provides network reputation scores to stakeholders by monitoring user interactions.
The Shyft technology ensures reduced compliance costs due to industry mandates (KYC, KYB, AML, EDD) are delivered with superior data privacy, user identity protection, and attestation efficiency than traditional compliance systems. Shyft enables users to securely inquire, receive, hold, and work with regulatory-compliant data.
The distributed network is exceptionally well-connected with global regulators enabling participants to be multi-policy compliant across the border. Shyft serves various compliance use cases like crowdfunding, investment, financial instrument exchange, subscriptions, and payment.
We created the Veriscope Governance Task Force to empower VASPs and give them a significant amount of autonomy and our partnership in the process of discovering the best way forward with full compliance of FATF recommendations.
About Veriscope
Veriscope is Shyft Network’s blockchain-powered solution to bring global compliance standards to the crypto space, especially crypto exchanges. These standards include the FATF’s Travel Rule direction. It is a compliance framework as well as a smart-contract platform for Virtual Asset Service Providers or VASPs.
About Shyft Network
Shyft Network is building the world’s first modern, secure, multi-stakeholder Blockchain-based digital identity ecosystem that enables KYC/AML attested data transfers. Combining privacy of data with efficiency of attestation, Shyft Network technology will radically streamline and simplify data collection, reduce cost and minimize the cybersecurity risks inherent in traditional compliance systems. Shyft Network is a public protocol designed to aggregate and embed trust, validation and discoverability into data stored on public and private ecosystems, and facilitate information transfer between permissioned and permissionless networks.
For more information on Veriscope, please visit https://veriscope.network/
