There’s a new Financial Action Task Force (FATF) on the block and its chief goal is to deal with the issue of privacy and cryptocurrencies. It is no exaggeration to say that the privacy issue is obsessing regulators worldwide and the reason is this; they are totally focused on what they see as crypto’s potential as a money-laundering mechanism.

Therefore they set up the FATF, which in June announced its recommendations on regulating cryptocurrencies for its 37 member countries. Naturally, its rule is controversial if you’re a crypto believer, because it says that “virtual asset service providers” (VASPs), including crypto exchanges, must pass information about their customers to one another when transferring funds between firms. It’s called “the travel rule.”

The 37 countries in the FATF have banded together to set international anti-money laundering standards. Jonathan Chester at Forbes says,

“It is essentially the United Nations for fighting financial crimes.”

This rule requires: “all financial institutions to identify both the sending party and the receiving party within a payment transaction equal to or greater than $3,000.”

You probably know that this ‘identification’ already takes place in relation to traditional bank transfers. But, as Chester remarks,

“accomplishing this directly within the Bitcoin is close to impossible.”

He explains why:

“There is a technique to embed text data by converting the data into a wallet address and sending that address a small amount of funds. However, this would be giving away private consumer data publicly with no way to remove it, forever.”

The travel rule raises other issues for crypto transactions. For example, would bitcoin custodians or exchanges be able to send funds directly to users’ wallets in amounts above $3000? And if they could, how would they be able to confirm the users’ identities. Might there some requirement that exchanges could only send sums greater than $3,000 to users with whitelisted addresses? And then again, what would an exchange have to do if it receives funds greater than $3,000?

Chester interviewed Neal Reiter, Director of Product Management of Identity Mind, a leader in international KYC and transaction monitoring industry. Reiter had this to say about the travel rule:

“if an individual wants to transfer bitcoin from their exchange account to an address outside of their platform, the exchange must also send seven different pieces of information: the sender’s name, the sender’s account number, the sender’s address, the sender’s financial institution’s name, the amount, the date, and the beneficiary’s financial institution’s name.”

His conclusion is that these terms would make it almost impossible for crypto to comply.

It is worth noting that this rule originates in the US and will first be applied in the USA. Chester wonders if other countries will follow. Juan Llanos, an expert in compliance believes they will, because

“most FATF member countries march in lockstep to the beat of the largest countries in the world, all of which agree that anonymity is anathema.”

He also made this warning:

“Law enforcement and national security public policy have prevailed over civil liberty. In other words, good-bye privacy; hello full transparency and surveillance.”

It may be the end of privacy, but it is most unlikely it will bring about the end of bitcoin — that is something to be thankful for.