Private Key Control Procedure (PKCP)
The Financial Action Task Force (FATF) Travel Rule requires cryptocurrency exchanges and virtual asset businesses operating in FATF member countries to reevaluate the procedures for transferring crypto assets. To comply with regulatory standards, virtual asset service providers (VASPs) must follow country-specific regulations when engaging in transactions involving self-hosted wallets as part of their anti-money laundering (AML) initiatives.
According to the Travel Rule (Recommendation 16), even in cases where a virtual asset transfer involves only one obligated entity at either end of the transaction, countries should ensure that this entity adheres to the requirements outlined in Recommendation 16 regarding their customers. For example, when a transaction occurs between a VASP and a self-hosted wallet, the wallet owner must demonstrate that they control the private key linked to it*.
VASPs can safeguard against sending funds to wallets their user does not control by requesting a proof of private key ownership. Private Key Control Procedure can be conducted in various ways, namely via:
By Visual Proof (or Screenshot)
Read more about self-hosted wallet private key control methods.
The Private Key Control Procedure is also known as Wallet Ownership Proof.
*Different regions have different interpretations of this Recommendation. Be sure to verify what your region requires before proceeding with a transaction.