Shyft Network announced the release of Veriscope today, its solution to pressing regulation called the Travel Rule. If the product is successful, it could help crypto companies become more compliant with incoming, stringent regulations.
The Travel Rule is an old piece of regulation that, in June 2019, was applied to the cryptocurrency industry. Laid out by the Financial Action Task Force (FATF), it requires those handling cryptocurrency to know where the money came from and where it’s going. Its purpose is to prevent money laundering, but with cryptocurrencies flying around the world—outside of the traditional banking system—the idea of tracking them was a daunting prospect.
Rick McDonell, FATF executive secretary and advisor to Shyft Network, said “The FATF left it to the crypto industry to find a compliance solution for KYC equivalent to that required of financial institutions. Many were skeptical it could be done. Well, the industry has responded.”
Veriscope is a compliance framework designed to meet the above requirements and enable exchanges to stay compliant. Rather than shifting to traditional banking methods, it runs on blockchain technology.
Several high-profile companies are already trying it out. “Veriscope is already being implemented across approximately 30 VASPs today, including Binance,” Shyft co-founder, Juan Araja, told Decrypt. A VASP, or virtual asset service provider, includes exchanges and other companies that handle the movement of cryptocurrencies.
Its underlying technology, the Shyft Network, is a layer that sits atop the various blockchains, making sure to keep them compliant when used. It’s a modified version of Ethereum that interacts with multiple blockchains.
Shyft has been in close contact with the FATF, and is now part of the task force’s blockchain industry working group.
Shyft is the new SWIFT
By treating cryptocurrency in the same way as fiat money, the FATF is expecting the same kind of compliance from crypto exchanges as it gets from every other financial service provider. In this way, it’s looking for a SWIFT—which organizes global payments for banks—of the crypto world.
“We named Shyft as the decentralized version of SWIFT,” co-founder of Shyft Network, Joseph Weinberg told Decrypt, adding,”Shyft: the SWIFT killer.”
Weinberg has acted in an advisory capacity for the OECD (Organisation for Economic Co‑operation and Aid), where he helped to create the intergovernmental organization’s Blockchain policy center. That policy center is now tasked with writing digital asset policy considerations for the G20.
Does crypto even want transparency?
If Veriscope gets adopted, it would slowly squeeze out aspects of anonymity and pseudonymity in the crypto industry—which some see as its advantages. But the Shyft founders argued there was a bigger outlook.
“Yes, there’s a section of the crypto community that expects, and believes in absolute privacy and freedom from regulatory bodies. However, we believe that mass adoption only comes from working with, not against, these bodies,” said Araja.
The Shyft founders said the FATF’s regulations will soon be targeted towards decentralized exchanges (DEXs), dapps and wallets. This could become particularly challenging, especially when there is sometimes no one person or team responsible for these. But Araja maintained that Shift could be applied even to such decentralized infrastructure.
And if it takes off there, cryptocurrency might stop being such a dirty word.