What Is the Travel Rule and
How Does It Affect Me?

Due to changes in regulations, your exchange now needs additional information from you to process transactions. Without this information, you will not be able to transact. This is the Travel Rule in crypto. 

Regulators have implemented this rule to prevent money laundering and terrorist financing and to protect crypto users, like you.

If implemented in your country or the country you want to transact with, you must abide by it.

The Travel Rule will not have a heavy impact on you. 

Depending on your country’s rules, all that might change is that you will need to provide some additional information when transacting. In fact, it is pretty similar to what you need to do in a bank transfer. 

If you are sending crypto assets, you may need to provide the name and wallet address of the person you are sending assets to, as well as your name, wallet address, and another identifying piece of data, like your address*. 

If you are receiving crypto assets, you may need to provide the sender with your name and wallet address*.    

*This data may change depending on the implementation of the Travel Rule. Different countries have different requirements.

Self-hosted Wallets [Ledger, etc] 

If you are sending from your self-hosted wallet, like a Ledger or Trezor, you can be asked to verify that you control the address from which you are trying to send your crypto assets. 

Your exchange may ask you to do a Satoshi Test, provide a screenshot of your address, or provide a digital signature to prove this control. 

Once you have done that, you will be able to transact. 

Read: Self-hosted Wallet Explained: Your Guide to Ownership Proofs

If you are sending from your self-hosted wallet, like a Ledger or Trezor, you can be asked to verify that you control the address from which you are trying to send your crypto assets. 

Even if you are sending to your account held at your exchange, this proof may be required. 

Your exchange may ask you to do a Satoshi Test, provide a screenshot of your address, or provide a digital signature to prove this control. 

Read: Self-hosted Wallet Explained: Your Guide to Ownership Proofs

Let’s say you’re sending Bitcoin to a friend who uses a different exchange.

Before your transfer goes through, your exchange needs to securely share some basic details about you with your friend’s exchange (and vice versa). This usually includes your name and your wallet address.

Just like with banks, this rule ensures there’s a record of who is sending and receiving funds, which helps regulators keep the financial system safe.

Your VASP handles the technical part of sharing the information behind the scenes. Sometimes, you might be asked to provide more details if you’re sending to or receiving from someone new, or using a self-hosted wallet, like a Ledger.

Your information is only shared between VASPs and is never made public. VASPs are required to keep this data secure by law.

There is no way around this; if the Travel Rule is in place, you will need to provide additional data to your exchange to transact. 

If you do not provide the data, or if it is wrong or incomplete, your transaction can be delayed or rejected. Moreover, if you do this repeatedly, your exchange may require even more data from you for future transactions or block your account. 

If you know the Travel Rule is live and your exchange doesn’t ask you to share certain transaction details, it could be because: 

• There may be a threshold in place. In some instances of the Travel Rule, data is only required if the transaction exceeds a specific threshold (USD 1000, for example). Your transaction may be below this threshold, so data is not required. 

• Your exchange is not fully compliant with the Travel Rule. While transacting becomes quicker as you do not need to share transaction data, this sort of exchange can put your funds at risk or lead to issues later during withdrawals or with regulatory authorities.

In either scenario, it is best to contact your exchange to query its status to ensure your transactions are not hindered in the future.

The Travel Rule intends to prevent criminals from using crypto assets for illegal activities. 

By sharing data with your exchange, you help hinder cyber crimes. With this information, your exchange can ascertain if funds are being sent or received from sanctioned addresses, countries or individuals. Moreover, it becomes easier for law enforcement agencies to track fraudulent transactions. 

Ultimately, contributing to a more legitimate market, fostering trust and attracting more users and investors, ultimately supporting a healthier and safer crypto ecosystem.