PayPal is the latest company to join Coinbase’s TRUST (Travel Rule Universal Solution Technology) network. The announcement was made via an official Coinbase blog post. The move is an attempt by PayPal to comply with the financial industry’s “Travel rule.”
The Travel Rule is part of the Bank Secrecy Act and mandates the compliance of US financial institutions. The Travel Rule asks financial institutions to share information regarding customers who transfer funds above a specific limit. The Financial Action Task Force (FATF) published travel rule recommendations for VASPs (Virtual Asset Service Providers) in June 2021. The G7 and 30 other developed countries are currently served by the FATF, an intergovernmental organization that manages anti-money laundering regulations.
The law requires that the FATF inform the senders and receivers of any crypto transaction over $1,000. Additionally, the FATF advises VASPs to include the sender’s address, account names, numbers, and the recipient’s identity.
How will Coinbase’s TRUST network help PayPal?
The TRUST network from Coinbase seeks to release the required information while maintaining user privacy. By adopting a compliance and risk management solution from Exiger, it will avoid using a central repository for user data and guarantee the reliability of its members.
Alongside Coinbase, several prominent cryptocurrency exchanges, including Binance.US, Crypto.com, Gemini, and Kraken, are a part of TRUST. Moreover, the USDC issuer Circle, the asset manager Fidelity Digital, the stock and cryptocurrency trading software Robinhood, and the cryptocurrency lender Nexos are different companies collaborating in the network.
Furthermore, in October 2020, PayPal made cryptocurrency trading available to its users. This summer, it added additional functionality, starting in June, allowing users to withdraw and deposit cryptocurrency. Since PayPal now offers a wider variety of crypto functions, it probably needs to adhere to rules strictly. Thus, PayPal’s move to join Coinbase’s network will most likely help it in this regard.