January 15, 2024

A Guide to FATF Travel Rule Compliance in the United States

A Guide to FATF Travel Rule Compliance in the United States
  • The FATF Travel Rule has been active in the US since 2013.
  • The minimum threshold at which the Crypto Travel Rule comes into force in the US is $3000. 
  • To comply with the FATF Travel Rule, US VASPs must verify and share customer identities, ensuring compliance with AML and CFT standards.

About 33.7 million Americans own cryptocurrencies in the US, whereas the crypto ownership rate in the country is 13%. Another study reveals that 40% of American adults now own crypto, up from 30% in 2023. 

Even more interesting is the fact that about 63% of current crypto owners want to obtain more crypto, with 21% of non-owners saying the first Bitcoin ETF, which was finally approved in the US on Jan 10, 2024, makes them more likely to invest in cryptocurrency. 

In light of the growing crypto adoption in the country, it is imperative to understand the regulatory aspect, especially the Crypto Travel Rule US. So, let’s get started!

Background of the Crypto Regulations & the FATF Travel Rule in the US

In the US, there is no formal regulation surrounding crypto as of yet, but they are the focus of both the state and federal governments.

The Treasury Department treats Bitcoin as a currency while the U.S. Securities and Exchange Commission (SEC) generally treats crypto assets as securities, and the CFTC refers to Bitcoin as a commodity. For federal income tax purposes, crypto is classified as property. 

When it comes to crypto exchanges, they must adhere to the Bank Secrecy Act (BSA) and have to register with the Financial Crimes Enforcement Network (FinCEN), and comply with anti-money laundering (AML) and terrorist financing (CFT) policies.

Then, there is the Crypto Travel Rule, which was introduced in June 2019 by the Financial Action Task Force (FATF), a global financial watchdog. The FATF brought cryptocurrencies under the scope of Recommendations 10 to 21 and, most importantly, Recommendation 16 – the Travel Rule.

It’s not as if the Travel Rule itself was conceptualized in 2019, as it has been in existence for many decades as part of the US Bank Secrecy Act to strengthen financial rules and establish communications between traditional financial institutions and law enforcement across borders. In 2012, the FATF included it as one of its Recommendations, and soon, the rest of the world also adopted the FinCEN Travel Rule.

Key Features of the Travel Rule in the US

Initially, the FinCEN Travel Rule only applied to banks and required financial institutions to share information about their customers and report any suspicious activities. Then, in June 2019, it was also applied to the crypto industry to prevent illicit activities and ensure compliance with AML policies.

While the FATF doesn’t clearly explain just how virtual asset service providers (VASPs) should comply with the Travel Rule, the agency does provide general requirements.

Under the Crypto Travel Rule US, VASPs, including crypto exchanges, OTC traders, hosted wallets, crypto custodial solutions, banks, and other financial bodies, are required to share the identities of their users who are involved in virtual asset transfers exceeding a certain threshold. VASPs must obtain and verify customer identification as well as share it with one another.

A VASP is defined as a legal person who transfers, exchanges, or stores virtual assets or participates in or provides financial services related to virtual assets. 

The user information that a VASP has to share while processing crypto transactions depends on the transaction value. The Fincen Travel Rule requirements for a value below the $3,000 threshold include: 

  • The name of the sender, i.e., originator, and the recipient, i.e., beneficiary
  • Both the sender and recipient’s virtual asset wallet address or a unique transaction reference number

If the value of virtual asset transfer exceeds $3,000, VASPs must collect:

  • Originator’s name, date and place of birth, wallet address, physical address, national identity number, or customer identification number
  • Beneficiary’s name and wallet address

VASPs must also carry out a counterparty VASP check to confirm that they are dealing with a registered/licensed VASP and that they have sufficient AML/CFT supervision. Moreover, VASPs also have to constantly monitor transactions in order to report any suspicious activity as part of a risk-based approach to AML and CTF.

VASPs must be licensed and registered in their jurisdiction. Additionally, they are required to screen customer wallets and to share any blacklists with other VASPs and relevant parties.

Impact on Cryptocurrency Exchanges and Wallets

Through the Crypto Travel Rule, VASPs prevent malicious individuals and entities from using cryptocurrencies for their elaborate money laundering and terrorist financing plans. 

This is achieved by requiring cryptocurrency businesses to collect and share customer information without exposing it to cybersecurity attackers while navigating its varied implementation from country to country. VASPs must also perform due diligence on beneficiary VASPs, maintain records, and report to relevant authorities.

However, the major challenge with the Crypto Travel Rule is that FATF only provides recommendations, which means it’s up to the member countries to decide whether to implement the rules and how, resulting in varying regulations.

For example, the United States and Canada have been among the relatively early adopters of the Crypto Travel Rule, while the United Kingdom only recently put the rule into effect. 

Not only has the enforcement of the Crypto Travel Rule been at varying rates in different jurisdictions, but it is also interpreted differently and requires different information. Also, the threshold for affected transactions is different, with the FATF recommending $1,000, lower than $3,000 in the US.


Implementation Year - Transaction Threshold

United States

2013 - $3,000

United Kingdom

2023 - No minimum threshold. More information is required for transactions over £1,000.


2020 - No minimum threshold. More information is required for transactions over SGD 1,500.


2023 - ¥100,000

To address these challenges, it's crucial for VASPs to adopt a flexible and comprehensive approach, such as a fully automated Peer-to-Peer (P2P) Travel Rule solution like Veriscope. This solution can adapt to the diverse regulatory requirements of different jurisdictions while ensuring compliance. Veriscope can provide a unified platform that simplifies the process of collecting, verifying, and sharing customer information securely across borders. 

By implementing such technology, VASPs can effectively navigate the complex landscape of international regulations like the FATF Travel Rule, maintain high standards of customer privacy and data security, and ensure compliance with the varying thresholds and requirements set by different countries.  

Global Context and Comparisons

As crypto adoption continues to grow globally, countries around the world have been ramping up their efforts to regulate the sector. 

In 2023, over 40 countries engaged in myriad initiatives to develop crypto-focused regulations and legislation — targeting licensing and listing guidance, stablecoin regulation, Travel Rule compliance, and crypto framework development. 

According to a PwC report, the vast majority of jurisdictions are discussing the FATF’s Travel Rule. 

Besides the Travel Rule, regulators are taking a range of approaches to regulate crypto with varying degrees of strictness. Some common approaches adopted include licensing and registration requirements, AML/CTF regulations, consumer protection measures, and determining the appropriate tax treatment.

In 2023, the US enforced most penalties and took strong legal action against major crypto players, including Binance and Coinbase. This is despite the fact that the country still lacks a comprehensive regulatory framework and has taken the ‘regulation by enforcement’ approach. However, a lot of legislative progress is being made on crypto laws, though there remains a lack of guidance from US regulators.

This has resulted in a fragmented regulatory landscape in the US, where the SEC regards crypto as securities while the CFTC regulates crypto derivatives, and FinCEN sets the AML and KYC requirements for crypto businesses.

Meanwhile, the European Union is all set to apply its unified regulatory framework, Markets in Crypto-Assets (MiCA), to ensure financial stability, market integrity, and investor protection. The law came into force in June 2023 and is expected to apply by 2024-end. Meanwhile, the UK plans to bring a range of crypto activities within existing laws governing financial services firms. 

While China has taken a restrictive stance towards crypto, Japan recognizes them as legal assets, and India is considering a comprehensive crypto regulation framework.

Meanwhile, the likes of Singapore, the UAE, and Hong Kong are developing robust regulatory frameworks, demonstrating a global shift towards the regulation of digital assets. This trend is exemplified by the Hong Kong Securities and Futures Commission, which has launched a registration regime for digital asset businesses. Similarly, in the Middle East, Dubai has taken a proactive step by launching VARA, or the Virtual Asset Regulatory Authority, to offer specific zones and guidelines for crypto trading.

Concluding Thoughts

The regulatory crypto landscape is constantly evolving, with governments around the world trying to strike a balance between taking advantage of the nascent technology & encouraging innovation and protecting consumers & financial stability. Here, the Crypto Travel Rule aims to play a crucial role in preventing crypto’s usage in money laundering and terrorist financing. However, complying with the Travel Rule requires guidance, a comprehensive solution like Veriscope, and collaboration with other entities and global regulators.

As the rapidly growing crypto ecosystem continues to mature, we will be seeing regulatory developments and more clarity that will shape the future of this industry.

Frequently Asked Questions

Q1: What is the minimum transaction threshold for the application of the Crypto Travel Rule in the US?

In the United States, the Crypto Travel Rule comes into effect for virtual asset transfers exceeding $3,000.

Q2: How must US VASPs comply with the FATF Travel Rule?

The US-based VASPs must comply with the FATF Travel Rule by verifying and sharing customer identities to meet anti-money laundering (AML) and counter-financing of terrorism (CFT) standards.

Q3: Does the Crypto Travel Rule apply to all types of cryptocurrencies and transactions in the US?

The Crypto Travel Rule applies to all cryptocurrencies and is triggered for transactions over the specified threshold of $3,000, regardless of the type of cryptocurrency involved.

Q4: What are the implications of the FATF Travel Rule for individual cryptocurrency users in the US?

While the Travel Rule directly impacts VASPs, individual users may experience stricter identity verification processes and data sharing when transacting amounts over $3,000 through regulated platforms.

Shyft Network powers trust on the blockchain and economies of trust. It is a public protocol designed to drive data discoverability and compliance into blockchain while preserving privacy and sovereignty. SHFT is its native token and fuel of the network.

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