The BitMEX cryptocurrency exchange where it is also possible buy Bitcoins, published a framework of principles on how to best store additional batches of transaction provenance data, a requirement that exchanges must address as part of the new anti-money laundering (AML) rules.
The BitMEX plan
To be in line with the rest of the financial system, virtual asset service providers (VASPs) now need to be able to obtain, store and exchange information about the authors and beneficiaries of transactions, according to a rule known as the “Travel Rule”.
The international anti-money laundering body, the Financial Action Task Force (FATF), expects the cryptocurrency industry to comply with the new law by June 2021. The response from the cryptocurrency industry has been enthusiastic, including a widely accepted standard. shared for the data payload format that VASPs must share (known as the InterVASP messaging standard or IVMS101), as well as a number of technical solutions focused on how best to implement the law by crypto companies, banks and associations.
However, according to Malcolm Wright, chief compliance officer of 100x Group, owner of BitMEX, less attention has been paid to how all this additional customer data should be stored.
“The solution developers focused on data transmission to make sure it was immediate and secure,” Wright said in an interview. “But what happens when the data actually arrives at its destination? How can you make sure they are stored safely and appropriately according to the right kind of standard? "
Wright, who worked on data archiving techniques (and was also instrumental in working with Sian Jones of XReg Consulting to create the IVMS101 standard), decided to leverage BitMEX security experts to "start a conversation" around data archiving through an open source project on which industry and regulators can intervene.
Applications of the BitMEX solution
BitMEX, based in Seychelles, was in the spotlight last year following an audit by US authorities regarding the company's weak compliance procedures, which is why arrest warrants have been issued for some senior executives and co- founders. BitMEX owner 100x Group hired Wright, a former compliance manager at Diginex, in October 2020.
The company has since been familiar with the KYC / AML processes and any non-KYC platform accounts have been removed. BitMEX's travel rule data storage principles focus on things like access management, encryption standards, and keeping Travel Rule data separate from other customer operational data.
This could help VASPs looking to complement each other by simplifying the procedure. “For example, if BitMEX chooses to exchange data with another VASP, then we might ask, 'Are you operating with a minimum setting like this?' Doing so also helps build trust among VASPs that they can work together, ”Wright said.
