What is the Travel Rule?
The Travel Rule is a regulation introduced in 2019 by the Financial Action Task Force (FATF) under Recommendation #16. It mandates Virtual Asset Service Providers (VASPs), such as crypto exchanges, to share certain transaction details for transfers exceeding a specific threshold. The goal is to combat money laundering and terrorist financing in the cryptocurrency industry.
When is it applied?
The Travel Rule is applied to transactions above a country-specific threshold*:
- U.S.: transactions over $3,000
- UK: requires beneficiary name for all transactions, with additional details for those over €1,000
- Canada: applies to transactions above CA$1000
*The thresholds mentioned above are examples of how some countries apply the Travel Rule. However, in other regions, the threshold that triggers the rule may be higher or lower. In some jurisdictions, all transactions may be subject to screening, regardless of the transaction value.
Why is it required?
The Travel Rule is required to:
- Prevent money laundering and terrorist financing.
- Ensure compliance with financial regulations and sanctions.
- Provide law enforcement with transaction data when needed.
- Support the development of standardized crypto regulations globally.
What is the direct impact for me as a customer?
- Transactions between exchanges (VASPs): If you send crypto above the set threshold, you must provide the recipient’s name, and additional details may be required. Most transactions are processed within 5 minutes, but some may take longer if extra verification is needed.
- Transactions to non-custodial wallets: Only the beneficiary name is collected.
- Withdrawals to another exchange: If the name on your account does not match the receiving exchange’s records or their monitoring system flags an issue, your transaction could be rejected. In such cases, you will be notified and may need to retry or contact the receiving exchange for clarification.