Sumsub keeps getting questions from our followers about the specifics of regulatory compliance, verification, automated solutions, and everything in between. We’ve therefore decided to launch a bi-weekly Q&A series, where our legal, tech, and other experts answer your most frequently asked questions. Check out The Sumsuber and our social media every other Thursday for new answers, and don’t forget to ask about the things that interest you.
This week, Ilya Brovin, Chief Growth Officer at Sumsub, will advise on the difference between the Sunrise problem and the Interoperability problem within the implementation of the Crypto Travel Rule, and discuss which one is more concerning. Follow this bi-weekly series and submit your own questions to our Instagram and LinkedIn.
The Sunrise problem in the context of the crypto Travel Rule refers to the uneven adoption of regulations across different jurisdictions. It can be summarized as follows: “Your counterparty VASP is in a jurisdiction that does not enforce TR. Therefore, they are not obliged to exchange PII with you.” In most cases, countries enforcing TR regulations provide carveouts for VASPs when dealing with counterparties in non-TR enforced jurisdictions, effectively accepting “best efforts” as a standard for fulfilling TR obligations. The typical solution to the Sunrise problem is to either
(a) send a message to a general email of the counterparty VASP and keep a record of this email; or
(b) create an accessible account for each Sunrise counterparty VASP, assuming that such counterparties could access those messages if they chose to.
Both of these options are realized within Sumsub’s full-functionality solution.
The Sunrise issue was most relevant when countries enforcing TR were in the minority compared to those not enforcing it. This led to the development of local TR ecosystems, ensuring compliance within a particular jurisdiction (e.g., South Korea, Japan, the USA) while treating the rest of the world (including other regulated countries) as Sunrise VASPs.
As more countries begin to enforce the Travel Rule (e.g., the EU from December 2024, the UK in September 2023, etc.), the focus is shifting from the Sunrise issue to the Interoperability problem, which is now becoming the main challenge for VASPs aiming to be TR-compliant. The Interoperability problem can be summarized as “Your counterparty VASP is compliant, so is willing to exchange PII, but uses a TR solution or protocol which your VASP are not integrated with”. As such, it centers on the difficulty of different Travel Rule solutions and technologies not working seamlessly together, making it hard for VASPs to exchange required information globally.
- Protocols can integrate with each other, allowing messages to travel across different networks (and we believe it’s the right way!).
- VASPs can integrate with multiple protocols and support two or more solutions, although this is highly inefficient. If your or your counterparty VASP use a non-interoperable TR solution, this is the only option to pursue.
Based on this, it’s possible to differentiate protocols by their openness to integration. Sumsub has built its solution on the principle of full interoperability. As of now, Sumsub has integrated all the protocols that are open to protocol-level integration: GTR (Binance), Code (which is connected to the VerifyVASP network and enables connectivity with all South Korean VASPs), Sygna (a leading solution in Japan), and TRP (P2P). This combined network of 5 protocols contains more than 500 connected VASPs globally and is the largest of its kind. Your VASP can access the whole network irrespective of which of these protocols it chooses to work with, significantly reducing the risks of the choice of protocol.
In summary, Sumsub’s Travel Rule Solution overcomes both the Sunrise and Interoperability problems. Check this article to learn about the features Sumsub’s solution provides.
The Sunrise problem, as well as Interoperability, and other issues are covered as part of Sumsub’s free Travel Rule course starting on October 3, 2024. This course is designed to accommodate all experience levels and diverse backgrounds. You’ll learn everything you need to know and have the opportunity to ask questions for the latest industry insights. You will receive downloadable guides with each module, quizzes to measure your progress, an exclusive invite to the live Ask Me Anything (AMA) session, and a course completion certificate.
Register now to master compliance!
Ilya Brovin
Chief Growth Officer at Sumsub
