CipherTrace—which provides crypto intelligence solutions—and Shyft–an identity solutions provider—have announced a partnership to help exchanges protect the identities of their users in light of draconian new regulations.

In the announcement, the two companies have come together in response to a recent agreement among members of the Group of Twenty (G20) that forces businesses operating within state borders to hand over information about customers when transferring funds. The so called “Travel Rule”, outlined by the Financial Action Task Force (FATF), an intergovernmental organisation designed to combat money laundering and terrorism financing, would have washed away many of the privacy features found on exchanges such as Binance and Huobi.

But a solution is in the works—one that complies with the rule while still managing to preserve user privacy. The trick, according to CipherTrace and Shyft, is to provide exchanges the option of using smart contracts and “cryptographic access controls” to manage access to private details, such as names, addresses and bank account details.

“With cryptographically controlled privacy mechanisms, it is possible to have both anonymity and responsible disclosure of the source of funds for legitimate purposes such as criminal or terrorist investigations and AML compliance,” said Dave Jevans, CipherTrace CEO. While Jevans makes it all sound wonderfully simple, others aren’t so sure.

“It would certainly be expensive,” Teana Baker-Taylor, executive director of industry membership body Global Digital Finance, told Decrypt back in May. “It would require the development of some interoperable platform layer that doesn’t exist today. And you would need a third party in there.”

But some have embraced the guidelines as an opportunity to develop new and much needed tools for Know Your Customer (KYC) and Anti-money-laundering (AML) protocols.

“While it's true these changes do present a challenge to the industry in terms of immediate implementation, they present real opportunities as well,” said Huobi Global CEO Livio Weng last week, in a press release. “This is a chance for us to develop industry standards to promote growth and protect user rights… and to develop our ability to respond as a community to the issues that the cryptocurrency and blockchain industries face.”

CipherTrace already has partnerships in place with leading exchanges, such as Binance, to improve blockchain security. Its tools also assist banks, investigators, and regulators such as Malta’s Financial Services Authority (MFSA.) Partnering with Shyft will allow more streamlined and efficient data collection, which the two companies hope, will help mitigate the security risks inherent in traditional compliance systems–and crypto exchanges.

As per Joseph Weinberg, Shyft’s founder, “This program bridges a critical gap between new regulatory standards and existing exchange operations to greatly strengthen the crypto ecosystem with a practical implementation of the FATF’s Travel Rule.”