Inquiring about the Travel Rule's applicability to decentralized exchanges, gambling platforms, and onboarding and offboarding platforms.
In the rapidly evolving world of cryptocurrency, understanding regulatory compliance is crucial for all players in the market. Sumsub, a leading compliance solutions provider, has launched a monthly Q&A series aimed at demystifying the Travel Rule and its implications for various types of cryptocurrency platforms.
The Travel Rule, primarily applicable to Virtual Asset Service Providers (VASPs) or similar financial intermediaries facilitating crypto transactions, is based on function rather than label. This means that decentralized platforms, gambling platforms, or on/off-ramp services may be subject to Travel Rule obligations if they perform functions akin to money transmission or custody.
In the United States, the Financial Crimes Enforcement Network (FINCEN) expects cryptocurrency exchanges and wallet providers to comply with the Travel Rule, treating them like traditional money transmitters under the Bank Secrecy Act (BSA). This compliance includes collecting and sharing transaction originator and beneficiary information, regardless of whether the entity calls itself an exchange or another type of platform.
Similarly, in the European Union, the Transfer of Funds Regulation (TFR), effective from December 2024, extends Anti-Money Laundering (AML) requirements and the Travel Rule to crypto-asset service providers (CASPs). These providers must collect and transmit originator and beneficiary data for every crypto transaction and verify ownership for transfers involving unhosted wallets above €1,000.
The regulatory approach focuses on the nature of the service, whether a platform facilitates or mediates transfers of crypto assets between users, rather than its branding as a decentralized platform, gambling site, or on/off-ramp. Thus, decentralized platforms or gambling platforms that allow crypto transfers may fall under Travel Rule requirements if they functionally operate as intermediaries or service providers in the transfer chain.
On/off-ramp services, which convert fiat to crypto or vice versa, also fall under these rules if they handle custodial wallets or perform transmission functions, due to their role in fiat-crypto conversions. However, if they only facilitate fiat-to-crypto (or vice versa) conversion within their own system, the Travel Rule might not apply.
Anastasia Sakharova, the Head of Fintech Compliance at Sumsub, will discuss Travel Rule applicability for decentralized platforms, gambling platforms, and on/off-ramp services in the upcoming Q&A series. New answers will be posted regularly, and audience members are encouraged to ask their own questions on LinkedIn. The Q&A series can be found on The Sumsuber and Sumsub's social media.
In crypto compliance, labels don't matter, functions do. Regulators constantly refine their frameworks, and enforcement ramps up, so it's important to understand where one sits within the regulatory landscape. The focus of this week's Q&A is on Travel Rule compliance.
Gambling platforms require careful consideration, as they must comply with VASP obligations if they engage in virtual asset activities. In DeFi platforms, individuals or groups exercising control over transfers, custody, or other regulated activities can fall under the scope of a "VASP". If a gambling platform offers custody services directly or via VASP, or facilitates withdrawals to third-party wallets, the Travel Rule compliance may be obligatory.
If on/off-ramp platforms move assets to or from other VASPs or unhosted wallets on behalf of users, they likely cross the threshold into Travel Rule territory. However, if they only facilitate fiat-to-crypto (or vice versa) conversion within their own system, the Travel Rule might not apply.
The EU's MiCA regulation reinforces the idea that compliance hinges on control and activity, not structure or branding. The application of the Travel Rule depends on the platform's actual functions, the level of control exercised, and how assets are handled.
The Q&A series will feature experts answering frequently asked questions, providing valuable insights for anyone navigating the complex world of cryptocurrency compliance. Stay tuned for the next instalment of the Sumsub Q&A series!
- Given that the Travel Rule applies based on the functions performed rather than the label of a platform, decentralized platforms, gambling platforms, or on/off-ramp services might be subject to Travel Rule obligations if they function as financial intermediaries or service providers in the transfer chain of cryptocurrency.
- In the rapidly evolving field of cryptocurrency, registering with regulatory bodies and adhering to regulations like the Travel Rule is essential for all players in the business of cryptocurrency, regardless of whether they brand themselves as an exchange, decentralized platform, gambling site, or on/off-ramp service.
