The US Travel Rule: What VASPs Need to Know
As convertible virtual currencies (digital assets) continue to reshape the financial landscape, regulatory compliance has become a critical focus for Money Services Businesses (VASPs) operating in the United States.
Central to these obligations is the US Travel Rule, a regulation under the Bank Secrecy Act enforced by FinCEN. This rule mandates the collection and sharing of specific customer information during certain convertible virtual currency transactions to combat money laundering and terrorist financing.
Since expanding the guidance in 2013 to cover convertible virtual currencies, the Travel Rule has set clear expectations for a wide range of activities, from peer-to-peer exchanges to decentralised applications.
Understanding the scope of these regulatory requirements, the data to be collected, and compliance best practices is essential for Money Services Businesses to operate securely and legally in today’s evolving crypto ecosystem.
Understanding the Regulatory Obligations for Money Service Businesses
Scope of the Travel Rule in the US
The US Travel Rule, part of the Bank Secrecy Act (BSA) and enforced by the Financial Crimes Enforcement Network (FinCEN), was introduced in 1996 for wire transfers to combat money laundering and terrorist financing. In 2013, the rule was extended to cover convertible virtual currencies (CVCs*).
In May 2019, guidance was issued that consolidated the existing BSA regulations, related rulings, and prior guidance issued since 2011, applying them to business models involving CVCs. Its purpose is to help financial institutions and Money Services Businesses (MSBs*) understand and meet their obligations under the BSA concerning CVC-related activities.
Currently, the US Travel Rule applies to the following CVC-related activities:
Peer-to-peer exchanges,
CVC wallet providers,
CVC kiosk operators,
CVC payment processors,
Decentralised apps (DApps)**
Trading platforms
ICOs
*Under cryptocurrency regulations in the US, digital assets are referred to as convertible virtual currencies (CVCs) and can be classified as cryptocurrencies, such as stablecoins; crypto-securities, such as Bitcoin and ETFs; and crypto commodities, such as BTC and ETH, among others.
Moreover, virtual asset service providers (VASPs) are referred to as Money Services Businesses (MSBs).
** If a DApp accepts and transfers value, FinCEN may treat its owners and operators as money transmitters. However, developers of software that merely provide network or communication services may be exempt.
Compliance Obligations for MSBs
Transactions meeting the definition of a “transmittal of funds” under FinCEN rules, such as those involving CVCs, may be subject to the Funds Transfer Rule and the Funds Travel Rule.
For CVC local and domestic transactions of $3,000 or more, the required customer and beneficiary information must be obtained or provided before or at the time of the transfer, even if transmitted separately from the value transfer itself.
Furthermore, the BSA framework requires financial institutions to foster a strong culture of compliance led by senior management, ensuring accountability, transparency, and adherence to anti-money laundering (AML) obligations.
MSBs must implement a written, risk-based AML programme that includes policies, controls, customer verification, suspicious activity detection, training, and independent reviews, with ownership or board approval.
Risk assessments should evaluate customer profiles, geographic exposure, and products or services offered to apply appropriate controls. MSBs engaged in money transmission must register with FinCEN within 180 days and comply with recordkeeping, reporting, and transaction monitoring rules, including filing Currency Transaction Reports and Suspicious Activity Reports.
| Business Model | Money Transmitter? | Obligations |
|---|---|---|
| Peer-to-peer Exchanges | Yes (if profit-driven) | Register, AML, reporting |
| CVC Wallet Providers | Yes | Register, AML, reporting |
| CVC Kiosk Operators | Yes | Register, AML, reporting |
| CVC Payment Processors | Yes | Register, not exempt |
| DApp Developers (service only) | Depends on role | Depends on role |
| Trading Platforms (no custody) | No | N/A, unless settlement role |
| ICO Administrators | Yes | Register, AML, reporting |
Required Travel Rule Data
For transactions equal to or above USD 3000, the following data is to be collected:
originator’s name,
originator's account number (when available),
originator's address,
originator's financial institution,
transfer amount and date.
beneficiary’s name (when available),
beneficiary’s account number (when available),
beneficiary's address (when available),
beneficiary's financial institution.
For transactions under USD 3000, basic recordkeeping of transaction details is required.
Unhosted Wallets (Self-hosted Wallets)
Unhosted wallets (self-hosted wallets) fall under the Travel Rule.
When a transaction involves an unhosted wallet and an MSB, the Travel Rule only applies to the wallet owner if the nature of the transaction falls within the definition of “transmittal of funds”*.
If the transaction can be defined as a “transmittal of funds”, the MSB must apply the Travel Rule based on its position in the transmission chain (either as a transmittor, intermediary, or recipient’s financial institution).
The Travel Rule does not apply to unhosted wallets when they are used for personal transactions.
*A “transmittal of funds” is defined as a series of transactions beginning with the transmittor's transmittal order, made for the purpose of making payment to the recipient of the order (31 CFR § 1010.100(ddd)). The term includes any transmittal order issued by the transmittor's financial institution or an intermediary financial institution intended to carry out the transmittor's transmittal order.
The term transmittal of funds includes a funds transfer. A “funds transfer” is a series of transactions beginning with the originator’s payment order, made for the purpose of making payment to the beneficiary of the order. The term includes any payment order issued by the originator’s bank or an intermediary bank intended to carry out the originator’s payment order (31 CFR § 1010.100(w)).
21 Travel Rule and the US Travel Rule
21 Travel Rule helps US VASPs comply with the Travel Rule by simplifying compliance with unhosted wallets, supporting risk-based AML programmes, and enabling secure, efficient transaction monitoring. This allows VASPs to meet FinCEN obligations while operating safely and efficiently in the convertible virtual currencies space.
Find out more about 21 Travel Rule - request a demo.
Further Reading
