Response to the EBA's Travel Rule Guidelines

Recently, alongside Crystal Blockchain, EU Blockchain Observatory and Forum, European Crypto Initiative and VASP Holdings, we had the opportunity to provide feedback on the Guidelines for preventing the abuse of funds and certain crypto-assets transfers for money laundering and terrorist financing purposes under Regulation (EU) 2023/1113.

Leveraging the group's experience, the feedback focused on enhancing clarity, coherence, and practicality in the guidelines, particularly for crypto asset service providers (CASPs) complying with the Travel Rule.

The group suggested the burden of guaranteeing Travel Rule interoperability should not be placed on the CASPs; instead, Travel Rule service providers should work on open and globally connected networks.

As active developers for interoperability, through the development of the open Travel Rule Protocol (TRP), we discussed the unclear guidelines for choosing technical solutions. We emphasised the importance of ensuring that selected messaging protocols support the seamless transmission and reception of Travel Rule. Additionally, the group challenged the proposal that self-hosted wallet owners should produce more than one technical proof of ownership in transfers above EUR 1000 as there is no evidence to suggest that the use of self-hosted addresses poses higher risks.

We highlighted the need for aligning guidelines with existing regulations and clarifying the treatment of self-hosted wallet addresses and the assessment of money laundering and terrorist financing risks (AML/CFT). We also urged for clarity in due diligence requirements, including documentation, escalation procedures, and risk mitigation measures.

Finally, clarity was requested on several other topics, for example, privacy-enhancing technologies and user verification. We asked that the Guidelines provide a finite list of high-risk techniques, products, or services based on their actual risk factor instead of referencing generally to anonymity-enhancing techniques, products, or services. 

The feedback provided aimed to improve the effectiveness of the guidelines. We are pleased to have had the opportunity to provide input on the EBA Travel Rule Guidelines and look forward to continued collaboration to address the evolving regulatory landscape in the crypto sector.