Travel Rule
- Charles Wernicke
- Karel Kyovsky
What is Travel Rule?
The Travel Rule is a regulatory requirement designed to prevent money laundering and terrorist financing, particularly in the financial and cryptocurrency industries. It comes from the Financial Action Task Force (FATF) guidelines. FATF is an international organization created to combat money laundering, terrorist financing, and other threats to the integrity of the global financial system.
The goal of the Travel Rule is to prevent companies and institutions to participate in money laundering. Involvement of the institutions and companies may result in money laundering at very large scale.
The Travel Rule mandates that certain information about the sender and receiver of a transaction to "travel" with the transaction itself when money (or value) is transferred between financial institutions or Virtual Asset Service Providers (VASPs) (or Crypto-Asset Service Providers: CASPs).
The intent of the Travel Rule is to retain Sender and Recipient details for every transaction and exchange such information between VASPs when certain threshold for transaction value is reached.
For transactions over a certain threshold (often $1,000 or €1,000, but this depends on local regulations), the following details are typically required:
Sender (customer) Information, including: full name, wallet address, and a physical address, national ID number, or date of birth and place of birth other identifying information. The Travel Rule now forces you to disclose and attach it to the transaction so that it may be examined by any authorized party later in time.
Receiver Information, including: name & wallet address. If you haven’t already implement strict KYC, then the Travel Rule now forces the matter. To comply with the Travel Rule, you must now (at least) collect your Receivers Name.
Glossary
The Travel Rule introduces some new terms and acronyms. Here’s a quick reference:
Term | Description | Reference |
|---|---|---|
VASP | Virtual Asset Service Providers Crypto-currency Exchange, Custodian Wallet , Crypto ATM Operator …. VASP may be regulated and unregulated. |
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CASP
| Crypto Asset Service Providers Same as VASP but defined in context of EU regulation. |
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Originator | Your customer, Sender, Payer. |
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Beneficiary | Your customer or 3rd party person, Receiver, Payee. Somebody who is receiving a value from Originator |
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PII | Personally Identifiable Information Information about Originator, Beneficiary and transaction | |
Envelope | Same as PII in context of CAS. |
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Travel Rule Provider | A third-party that enables authorized transfer of TR PIIs(envelopes) between VASPs within its network. |
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Originator VASP | VASP that is sending crypto-asset value on behalf of a customer |
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Beneficiary VASP | VASP that is receiving crypto-asset value on behalf of a customer |
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Hosted wallet | Crypto-currency wallet where the private keys holds VASP. |
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Custodian wallet | Same as Hosted Wallet. |
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Self-hosted wallet | Crypto-currency wallet where the private keys holds the customer/individual. For example customer is operating his own wallet on his computer or phone where the keys are on the device. |
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Unhosted wallet | Same as Self-hosted wallet. |
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History
Historically Travel Rule existed in pre-crypto era for trans-border fund transfers. Due to cryptocurrency’s borderless nature the regulators decided to apply same rules for cyrptocurrency transfers.
CAS has supported Travel Rule since 2019 by facilitating Travel Rule provider Cipher Trace Traveler. After MasterCard acquired CipherTrace in 2021 it came to a decision in 2024 to sunset Cipher Trace Traveler services in 2024.
In fall of 2024 GB added native support for Travel Rule.
In 2024 European Union came with its own very strict application of Travel Rule guidelines which CAS partially supports from fall of 2024 and fully from February 2025.
We recommend you to continue reading about EU Travel Rule as the Travel Rule guidelines implementation in your country may be very similar to ones used in EU.
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