PayPal has joined Coinbase’s Travel Rule Universal Solution Technology (TRUST) network, which aims to “protect the security and privacy” of customers while complying with the banking industry’s Travel Rule.
The TRUST network was launched in Feb by 18 prominent virtual asset service providers (VASPs), including Kraken and Robinhood. The addition of PayPal takes the membership to 38.
Under the Travel Rule in the U.S., VASPs are legally required to pass on specific information relating to customer fund transfers from one financial institution to another on amounts greater than $1,000.
Coinbase’s TRUST network discloses the necessary data while protecting user privacy at the same time. It will avoid using a central store of user data and ensure its members are trustworthy through a compliance and risk management solution provided by risk management firm Exiger.
PayPal move seen as validation for industry
Coinbase is one of the most popular cryptocurrency exchanges in the world and has been working hard to make itself compliant with various regulations.
PayPal serves 400 million consumers worldwide, and entrance into the digital currency space will help validate the industry and open up even more doors for cryptocurrency adoption, according to a Coinbase statement.
The development comes after the payments firm started allowing users to transfer, send and receive digital assets between PayPal and other wallets and exchanges in June.
PayPal initially moved into the digital assets sector in Oct 2020, but users then were restricted to buying and selling crypto on the company’s own platform.
Coinbase faces lawsuit over alleged unauthorized asset transfers
Meanwhile, investors owning Coinbase Wallets and accounts have filed a class action complaint claiming that Coinbase has breached its user agreement by locking clients out of their accounts and authorizing the transfer of assets without consent.
According to the suit, “Coinbase locks out its customers from their accounts and funds for unreasonable lengths of time, or permanently.”
Due to the extreme price swings of cryptocurrencies, with drops of 40% in 24 hours not uncommon, the inability to access an account to sell, buy or trade cryptocurrency results in substantial financial loss for “account holders.”
Due to the lawsuit filed against Coinbase by its investors, who accuse the firm of failing to prevent losses resulting from unauthorized transactions, and for failing to pursue numerous legal actions in court.
This has prompted the exchange to seek Securities and Exchange Commission (SEC) guidance on security classification.
The role of the Securities and Exchange Commission
The SEC has not positively identified which tokens qualify as securities, and therefore required registration with the authority. The current Chair Gary Gensler argues that this lack of identification also occurs in other markets.
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