What is the Travel Rule?
The Travel Rule (Recommendation 16 of FATF) is a global standard and regulatory requirement aimed at combating financial crimes, such as money laundering and terrorist financing, within the financial industry. The recommendation was adopted in the European Union under the EU Regulation 2023/1113, entering into full force on 30 December 2024.
Due to recent legal changes in the EU, Crypto Asset Service Providers (CASPs), including SwissBorg, must comply with specific information-sharing requirements when processing crypto transfers. These regulations apply to all CASPs in the EU, as well as to traditional financial institutions like banks and payment service providers.
As a regulated service provider in the EU, SwissBorg is required to adhere to the recently introduced Transfer of Funds Regulation, which enforces the Travel Rule for CASPs across Europe. Under this regulation, CASPs must collect specific information about both the sender and recipient of a crypto asset transfer. This applies to transfers involving crypto wallets as well as those between exchanges and other CASPs. When a transaction involves another CASP, the collected information must be shared with that entity.
Below is a comprehensive guide to understanding how the Travel Rule affects your crypto transactions with SwissBorg and the steps you’ll need to take.
How Does SwissBorg Comply with the Travel Rule?
As part of SwissBorg’s commitment to regulatory compliance, we are required to collect and share certain information when users conduct crypto asset transfers, especially when transferring funds to or from another CASP. In some cases, we may also need to verify that you own or control the self-hosted wallets used for sending or receiving funds.
The information collected may include your name, home address, date of birth, and account number.
Below is an overview of the steps involved.
1. Crypto Transfers to and from Exchanges (CASPs)
Deposits from Other CASPs
When receiving funds from another exchange or CASP, they must provide specific information, such as the sender’s name, date of birth, or home address. The transfer will be held until the required details are received and matched with your information. If the details do not match, we may be required to return the funds in some cases.
Withdrawals to Other CASPs
When withdrawing funds to another exchange, ensure that the destination account is under your ownership. SwissBorg will securely share your data with the receiving CASP to comply with Travel Rule requirements. If the receiving CASP is unable to match your information, the withdrawal may be returned in some cases.
2. Crypto Transfers to and from Self-Hosted Wallets
Deposits from Self-Hosted Wallets
If you deposit funds from a self-hosted wallet (where you control the private keys), you may be required to confirm ownership. For large transactions, additional verification may be required by signing a message with your wallet. Once verified, the wallet address will be whitelisted for future deposits.
Withdrawals to Self-Hosted Wallets
If you withdraw funds to a self-hosted wallet (where you control the private keys), you may be required to confirm ownership. For large transactions, additional verification may be required by signing a message with your wallet. Once verified, the wallet address will be whitelisted for future withdrawals.
Address Book
SwissBorg has an Address Book system to help streamline compliance with the Travel Rule. Before initiating withdrawals, you’ll need to add any external wallet addresses — whether with another CASP (e.g. exchange) or self-hosted — to your Address Book. This system will also allow you to add, update, or remove addresses as needed.
Frequently Asked Questions
Why is wallet ownership verification required?
Under the Travel Rule, SwissBorg must verify the ownership of self-hosted wallets before processing certain transactions. This measure helps prevent illicit activities such as money laundering and terrorist financing by ensuring that the wallet belongs to the user and identifying the parties involved in the transaction.
How does SwissBorg verify wallet ownership?
With a Digital Signature. In certain cases, for example large transfers, you may be asked to sign a message with your self-hosted wallet to prove that you control it.
We will assist you with the digital signature process when needed.
What happens if another CASP can’t provide the required Travel Rule information?
If a CASP (e.g. Exchange) is unable to provide the required information, your transaction may be delayed or rejected. To prevent this, ensure that all your account details are up-to-date with the CASP initiating the transfer.
How do I know if my transaction is affected by the Travel Rule?
Any crypto transfer triggers the need for information sharing and verification, your required actions depend on whether the transfer is made to or from a CASP (e.g. Exchange) or a self-hosted wallet.
What if I want to withdraw to a wallet that isn’t in my Address Book?
Before withdrawing to any wallet (CASP or self-hosted) you need to register the address in your Address Book.
Will I need to verify wallet ownership every time?
Once your wallet is verified, it will be whitelisted for future transactions, and you won’t need to go through the verification process again unless you change the wallet or transfer funds to a different address.
Can I add a friend's wallet to the Address Book?
No, in the Address Book you are allowed to only enter wallets under your name or control. Failing to comply with this requirement may lead to the termination of your SwissBorg account.
Key Takeways
The Travel Rule is a regulatory requirement that helps ensure the legitimacy of crypto transactions and protects users from potential illicit activities. By following the guidelines and completing the necessary verifications, SwissBorg users can continue to enjoy secure and compliant crypto transfers. If you have any further questions or require assistance with the Travel Rule verification process, our support team is available to help.