What Is the Crypto Travel Rule and How Does It Work?
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The Travel Rule was initially introduced by the Financial Crimes Enforcement Network (FinCEN) as part of funds transfer rules under the U.S. Bank Secrecy Act on May 28, 1996. Itrequired financial institutions to pass on specific information to the next institution in certain funds transmittals involving more than one institution.
In 2018, the Financial Action Task Force (FATF), an intergovernmental global money-laundering (ML) and terrorist financing (TF) watchdog, incorporated the Travel Rule as part of its FATF recommendations for regulating financial activities involving virtual assets.
On Oct 28, 2021 FATF updated its guidance document, first adopted in 2019 for a risk-based approach, to virtual asset and virtual asset service providers. As such, businesses that conduct crypto-related transactions are now subject to the Travel Rule.
Such a move was inevitable, due to the increased fraud cases and money-laundering accusations surrounding cryptocurrencies such as Bitcoin and privacy coins such as Monero.
In this guide, we’ll discuss everything you need to know about the Crypto Travel Rule, how it works, and its implications for the cryptocurrency industry.