Travel Rule

FATF Recommendation 16 requires that originator and beneficiary information travel alongside a transfer, extended to virtual asset service providers in 2019. The FATF baseline threshold is USD or EUR 1,000, but jurisdictions set their own. The EU's recast Transfer of Funds Regulation has applied to crypto transfers with no minimum since 30 December 2024, while the US funds-transfer rule applies from $3,000. Above the applicable threshold, the sending institution must transmit name, account identifier and certain address or identity details to the receiving institution. IVMS101 is the data standard that makes those messages interoperable.

The friction is structural. A blockchain transfer carries value with no message layer attached, so the compliance data has to move over a completely separate channel and be matched to the on-chain transaction at the other end. That requires the receiving institution to be identifiable, reachable, and running a compatible protocol, none of which the blockchain provides.

Two problems follow. The sunrise issue: jurisdictions adopted the rule at different times, so compliant institutions routinely transact with counterparties under no equivalent obligation. And self-hosted wallets, which have no institution on the other side at all, are treated inconsistently, with some regimes requiring additional verification above a threshold and others declining to extend the rule to them. Both gaps remain open.