As crypto adoption accelerates, regulators are ramping up enforcement of the Financial Action Task Force’s (FATF) Travel Rule compliance in APAC.
Governments remain cautious, driven by concerns over financial stability and the absence of centralised control. As a result, many have passed legislation to implement the Travel Rule for virtual asset service providers (VASPs).
Yet according to Sumsub’s guide on enabling secure crypto payments, 75% of jurisdictions in the region are still either non-compliant or only partially compliant, leaving loopholes that fraudsters are already exploiting.
Identity fraud is a major concern, especially with the use of AI to carry out sophisticated scams. Since 70% of fraud occurs after onboarding, ongoing user monitoring is a non-negotiable for crypto companies.
Four Years In, The Compliance Gap in the Travel Rule Still Exists
In 2021, the FATF updated its risk-based guidance for virtual assets and VASPs, reinforcing the Travel Rule. It requires financial institutions and crypto firms alike to collect and share accurate information on both the sender and recipient of virtual asset transfers. This is crucial to fighting money laundering and terrorist financing.
However, implementation has been inconsistent across jurisdictions, worsened by the “sunrise issue”: uneven adoption prevent compliant data exchange between VASPs in different regions. Four years since the standard was introduced, private-sector compliance still trails behind other financial industries.
Key issues include weak risk assessments, delayed rollout of the Travel Rule, and a lack of interoperability among compliance tools. VASPs must adopt robust risk mitigation strategies and ensure their systems can communicate across borders to close these critical compliance gaps.
Future trends also indicate that more countries like India and Indonesia are expected to begin enforcing the Travel Rule more strictly, raising the stakes for VASPs.
If left unchecked, poor compliance procedures don’t just expose individual firms to regulatory and reputational risks. They undermine trust across the entire crypto ecosystem and open the door to massive industry-wide losses.
VASPs must act decisively by adopting robust, interoperable risk mitigation frameworks that meet global standards and enable secure cross-border data exchange.
Andrew Ilinsky, Product Owner at Mercuryo, a global payments ecosystem, notes that while regulators are introducing frameworks similar to those for traditional finance, the crypto landscape presents unique challenges. This is why the industry remains cautious about overregulation, which could stifle innovation.
He adds that compliance is key to accelerating crypto adoption, and tools like Sumsub will be essential in helping companies scale and support industry growth.
Strengthen Your Compliance to Ensure Secure Crypto Payments
To help crypto companies better understand and tackle these evolving challenges, Sumsub’s Guide to Secure Crypto Payments in the APAC Region with RedotPay offers actionable insights on Travel Rule implementation, fraud prevention, and regulatory best practices.
It breaks down where compliance gaps remain, what businesses must do to protect themselves, and what’s next for verification in an increasingly high-stakes environment.
Download the Guide to Secure Crypto Payments in APAC, with Sumsub and RedotPay.
Featured image: Edited by Fintech News Hong Kong, based on image by putilich.55 via Freepik