What is the FATF Travel Rule?

The Travel Rule's Impact on Bitcoin in New Zealand

By Lightning Pay Team

Updated October 31, 2024

 

New Zealand Regulation Changes

At the end of July, the New Zealand Department of Internal Affairs published new guidance for Virtual Asset Service Providers (VASPs) in New Zealand, relating to new AML/CFT regulations. These changes, in effect, apply the FATF "Travel Rule" to bitcoin and cryptocurrency transactions in New Zealand. The new regulations, going into effect June 2024, three regulatory changes impact the treatment of bitcoin and other cryptocurrencies in New Zealand. Each of these regulations update the definition of terms relating to the AML/CFT act:

  • Regulation 4 of the AML/CFT (Definitions) Regulations 2011 - This rule explicitly defines a "Virtual Asset."
  • Regulation 24AA of the AML/CFT (Definitions) Regulations 2011 - Includes Virtual Assets in the definition of "transactions."
  • Regulation 24AB of the AML/CFT (Definitions) Regulations 2011 - Includes Virtual Asset transactions in the definition of a "Wire Transfer." 
  • Regulation 15A to Regulation 15L of the AML/CFT (Requirements and Compliance) Regulations 2011 - Requires VASPs to consider Virtual Asset transactions as an International Wire Transfer.

 

New Zealand Wire Transfer Regulations

When you make an international wire transfer in New Zealand, a number of data collection and reporting requirements are applied to financial institutions.

  • Banks and other financial institutions are required to collect details regarding the payer (originator) and receiver (beneficiary) of a wire transfer.
  • If the Financial Institution in question is the originating institution, they must transmit data collected on the transaction to the beneficiary institution.
  • Both a receiving (beneficiary) and sending (originating) institution must report any international wire transfers with a value over NZ$1,000 to the NZ Police Financial Intelligence Unit (FIU).

 

Travel Rule Impact on Bitcoin in New Zealand

The "Travel Rule" now extends this to Bitcoin transactions executed on behalf of customers by companies like Lightning Pay. The rule's application has some caveats:

  • Reporting and Information Sharing rules do not apply if the transaction originates or is sent to a Self-Custody Wallet
  • Therefore, the rules only apply if the transaction is being sent from one VASP to another, on behalf of users of each Financial Institution.

In simple terms, the new rules apply when you are sending or receiving bitcoin between two regulated platforms, like exchanges or other virtual asset service providers, not peer-to-peer or personal transactions between wallets.

Because Lightning Pay meets the definition of a VASP, and is a regulated entity in New Zealand, we have to enforce the travel rule as well. Here's what you're likely to see at Lightning Pay as a result.

  • We will occasionally ask you for more information about your address or transaction
  • Under certain circumstances, described above, we will have to share part of this information with a receiving institution.
  • We will be required to report certain transactions between Lightning Pay and another Financial Institution, with a value of NZ$1,000 or higher, to FIU

You can read the official information about this rule change on the DIA website.

 

Summary of the Travel Rule application to Bitcoin in New Zealand

A new regulatory definition of Virtual Assets, and a new compliance requirement has been implemented with regard to bitcoin and other virtual assets in New Zealand. The impact is that all bitcoin and virtual asset transactions between New Zealand VASPs and/or other Financial Institutions must be treated as International Wire transfers with regard to compliance and reporting rules.

Lightning Pay is a VASP, according to accepted definitions, and is a regulated financial institution in New Zealand, and therefore, must comply with these new rules. 

We will, as always, endeavour to implement this in such a way that our platform remains the easiest, fastest, and cheapest way to buy, sell, spend and use bitcoin in New Zealand. In addition, we will continue to respect our users, and are working very hard to implement these rule changes in the most responsible way possible.

If you have any questions, please feel free to send us a note at support@lightningpay.nz