The complete world is accommodated with technological innovations and advancements. Data production rate is expanding simultaneously with technological innovations and advancements. Also, more and more people are prone to financial technology and digital banking because of tech innovations. The pandemic year was another reason for people to acquire digital transactions. This leads to the reality check that it’s high time for financial infrastructures to integrate themselves with such products that provide promising solutions to monitor and prevent terrorist financing and other relatable money laundering activities.
The FATF formally acquired an essential new clarification to their Recommendation 16 referring to wire transfers in June 2019. This crypto travel rule asks countries to ensure that virtual asset service providers (VASPs) in their local jurisdictions share originator, as well as benefactor data with one another and law enforcement during transmission when they are requested. There are numerous reasons why KYT is a solution provider that is falling short of providing global solutions that can effectively prevent systemic crypto-facilitated terrorist financing and money laundering. Also, there exist several reasons why top-down supervisions such as FATF’s recommendation 16 may literally be a mandatory and essential step for the industry to progress and mature.
Here are some points that came across after making a comparison between the KYT solution provider and travel rule.
KYT Can Only Monitor Illicit Transfers, But Travel Rule Can Stop Them
KYT verification takes place during and after the completion of dubious transactions, without the capability of stopping the transmission of funds. This makes the technology more mature and reactive in nature by distinguishing among fraudsters and potential customers of the organization. Travel rule attains the direct route by making the solution of real-time AI-powered identity verification information mandatory at the time of the transaction or before transactions.
Travel Rule is Effective To Not Some, But All Countries
More than 200 countries are expected to incorporate the implementation of the organization’s recommendations domestically through their affiliation with FSRBS (FATF’-Style Regional Bodies). In comparison, the geographical reach of KYT companies fades with the market leaders only operating in fewer than 20% of the FATF’s amalgamated jurisdictions. The comprehensive blockchain surveillance measures are required to be expanded among all countries to be effective terrorist financing and money laundering deterrent.
KYT Solutions are Expensive in Comparison To Travel Rule
Know your transaction solutions are intensive on resources and time which is still victorious for a tremendous market of bigger VASPs and enormous financial institutions that can effortlessly afford the price of blockchain analytics. For instance, the CKYT verification solution charges $1 to the user, meaning that exchanges such as Coinbase have to fork out an amount of $22 million annually for the investigation of their customers. Various KYT solution providers offer such solutions at such prices that are not easy to scale cost-effectively. With the collective backing of regulators as well as VASPs, a widely attained travel rule solution is capable of proving cost-effective prices on the basis of economies of scale.
The Travel Rule Gives a Fresh Start To The Cryptocurrency Industry
Contextual analysis is required for the KYT technology. It is the only major concern priorly and presently when it boils down to cryptocurrency transactions while mainly focusing on what and why has happened already. The travel rule is painful to implement for some, hence it provides a fresh start to the industry of virtual assets. The industry, as well as regulators, can work together on a solution for the assurance of regulated virtual assets by aiming to sanitize the transactions that are occurring between VASP users. This will make all the virtual assets regulated and wallets as capacious as actual fiat currency.
The Travel Rule Creates a Line That Cannot Be Crossed By Fraudsters
FATF cleans up the exchanges by the validation and authentication of real identities of users that are involved in transactions via shared KYC data attained by VASP during signup. While these rules and modulations will not eradicate or agitate all the criminal activities from centralized exchanges where the reward superficially overcomes the risk, it will, no doubt, force a fundamental portion of criminals underground to move out of the exchange domain where their obscurity is not at risk.
What Does The Future Hold for KYT and Travel Rule?
No one, literally no one can deny the efforts of KYT solution providers that are made by them in recent years to deter fraudsters and cybercriminals who attain sophisticated measures to have unauthorized access to the network. With the travel rule only proves to be effective after the complete decapod of cryptocurrency trading, it is not there to unanticipatedly substitute KYC along with KYT verification as the new gold levels in blockchain analytics. In reality, this only proved to be an additional piece of the jigsaw puzzle that is required for cleaning up the cryptocurrency industry. It develops an endpoint from which KYC analysts can backward for the connection of dots. However, KYT verification has to evolve to stay competitive and relevant as more and more transactions are vetted each day.