Travel Rule
A rule requiring a firm that sends a customer transfer to pass identifying details about sender and recipient to the receiving firm.
The requirement began in wire transfers and was extended to virtual asset service providers by the Financial Action Task Force in 2019, under Recommendation 16. In practice, when one exchange sends assets to another, it must transmit originator and beneficiary information such as name and account identifier, and the receiving firm must check it and act on discrepancies. Because blockchains carry no such fields, the information travels over separate messaging systems built for the purpose, and firms must first identify which provider controls the destination address. Transfers to self-hosted wallets are handled differently across jurisdictions, which is why some exchanges ask users to declare and sometimes prove ownership of an external address.
In de praktijk
A withdrawal screen asking whether the destination address belongs to you or to a third party, and if a third party, to whom, exists because of travel rule implementation.
Het veelvoorkomende misverstand
That the travel rule places personal data on the blockchain, when the information moves off-chain between regulated firms and never appears in the transaction itself.