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Elliptic Discovery Established to Seamlessly Assist Banks in Crypto-Asset Decisions

Elliptic, a London-based provider of crypto-asset risk management solutions, has launched of Elliptic Discovery, a database of more than 200 worldwide crypto exchanges, that is purposely built for banks in their quest to determine the flow of funds into and out of crypto-assets.

Elliptic Discovery seeks to offer banks insights about opportunities and risks presented by crypto exchanges as it comprises of a wide range of identifiers and risk indicators.

Some of the information to be availed pertaining to crypto exchanges include compliance policies, regulatory status, corporate entities, and jurisdiction. Additionally, blockchain insights about the crypto assets they have handled will be provided.

Banks to easily comprehend the crypto ecosystem

By utilizing Elliptic Discovery, banks will be in a position to comprehend their overall exposure to crypto-assets based on their clients’ activities. Moreover, they will be able to spot customers whose crypto assets are endangered by sanction risks or money laundering.

James Smith, Elliptic’s CEO and co-founder, noted: “For too long, banks’ lack of visibility into the crypto-asset ecosystem has led to zero-tolerance for this emerging asset class. This has frustrated their customers, while they have remained blind to the actual risks posed by their exposure to crypto-assets. Elliptic Discovery changes that by enabling banks to shine a light on their customers’ crypto-asset activity and take a risk-based approach.”

He added: “Not all crypto-asset exchanges are alike and Elliptic Discovery will allow banks to make this distinction and seize the opportunity to work more closely with these businesses, based on an evidence-based assessment of the risk.”

Elliptic Discovery, therefore, seeks to propel transparency between traditional financial institutions, such as banks, and crypto exchanges so that a win-win situation can be established.

Elliptic partnered with Zilliqa, a Singapore-based blockchain network provider as reported on Nov. 28, to facilitate the infrastructure compliance and security of the latter’s network by offering an anti-money laundering (AML) compliance support.

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FATF Assessment Finds Majority of US Exchanges are Compliant with Virtual Asset Guidance

The Financial Action Task Force (FATF) has published an assessment of the US’s compliance with its revised criteria for anti-money laundering (AML) and terrorist financing (CTF) through virtual assets and found that most virtual asset providers are compliant.

Recommendation 15 – Travel Rule

It began in June of 2019, one of the most authoritative regulatory organizations worldwide, the Financial Action Task Force (FATF), issued new guidelines on how digital assets should be regulated.

A point that caused great concern and confusion for exchanges was the “travel rule,”: which refers to section 7(b) in the Interpretative Note to Recommendation 15 in the FATF Guideline, which requires Virtual Asset Service Providers (VASPs) to collect and transfer customer information during transactions.

While the recent FATF assessment concludes that, “the US remains rated as Largely Compliant with R.15,” it still cited minor deficiencies such as the requirement for US-registered money services to only be obligated to keep records of transactions of $3,000 or more, a limit three times that recommended by FATF, which the regulatory watchdog believes could be manipulated by bad actors. From the assessment, FATF wrote,“This higher threshold is not clearly supported by low ML/TF risks.”

The FATF also concluded that US Regulators, such as FinCEN and the SEC, are also behind in their investigations of convertible virtual currency (CVC) business. The watchdog was critical of the US Regulating bodies’ strategy which “does not specifically identify higher risk virtual asset service providers (VASP),” making their “various” examinations of high-volume exchanges and peer-to-peer networks insufficient.

Advantages of the Travel Rule

In a previous interview with RegTech expert and CEO of IComply, Matthew Unger told Blockchain.News about the advantages of implementing Recommendation 15 despite the concerns of many VASP and exchange operators.

Unger said, “First and foremost, there’s the mainstream adoption—because this is the last piece of compliance needed for crypto assets to be held to the same standard as the rest of the financial industry.”

“Secondly, without the FATF travel rule or something similar to the travel rule, the security token industry will never survive because every platform is creating its own protocol, which is causing massive fragmentation.” He concluded, “Finally, the use of the travel rule enables more institutional investors to trade cryptocurrencies for their clients while lowering the cost and manual compliance work required for each trade.”

United States CFTC Issues Advisory on Digital Currencies for Futures Commission Merchants

The Division of Swap Dealer and Intermediary Oversight (DSIO) of the Commodity Futures Trading Commission (CFTC) has released an advisory to futures commission merchants (FCMs) clarifying how to hold digital currencies in segregated accounts.

Segregated accounts are customer funds that are held in separate accounts from a company’s own funds. The clients’ funds are held in a separate account so that there is no relationship between their accounts and the company’s bank account.

According to a press release on Oct. 21, the CFTC’s Division of Swap Dealer and Intermediary Oversight’s advisory provides guidance to FCMs on how to hold and report certain deposited virtual currency from customers in connection with physically-delivered futures contracts or swaps.

Additionally, the CFTC’s advisory also provides guidance that FCMs should follow when designing and maintaining risk management programs concerning the acceptance of virtual currencies as customer funds.

DSIO Director Joshua B. Sterling said in the release:

“At the CFTC, one of our core values is to provide clarity to market participants […] As Chairman Tarbert has stated, the CFTC is committed to fostering responsible fintech innovation and improving the regulatory experience of registered firms where doing so is consistent with our rules. This advisory furthers these critical goals and will provide additional certainty on these issues as the Commission works to establish a holistic framework for digital asset derivatives.”