As the regulatory landscape for cryptocurrency continues to evolve, it’s essential for businesses and investors to stay informed about upcoming changes. One of the most significant developments is the Travel Rule, which will directly impact how Finoa operates in the digital asset space. From 30th December 2024, Finoa is legally obliged to comply with this rule, and it's important that our clients understand how this will affect their transactions.


What is the Travel Rule?

The Travel Rule stems from the Financial Action Task Force (FATF) recommendations, a global body that develops standards for anti-money laundering (AML) and combating the financing of terrorism (CFT). In 2019, FATF extended its Travel Rule—originally designed for traditional financial institutions—to include virtual asset service providers (VASPs), such as Finoa.

In essence, the Travel Rule requires VASPs to collect and share specific personal information about the parties involved in certain cryptocurrency transactions. While a typical value threshold is often set at $1,000 or €1,000, the actual threshold can vary across jurisdictions and transaction types. For instance, in the European Union (EU), all transactions between VASPs require a Travel Rule message, while transactions involving self-hosted wallets require data collection and verification when exceeding €1,000. It’s important to note that even for lower-value transactions, data exchange may still occur depending on the applicable regulations in a given region.

This regulation, which mirrors the rules governing traditional wire transfers, is designed to combat illicit activities such as money laundering and terrorist financing.


Why is the Travel Rule necessary?

As digital assets continue to gain mainstream acceptance, regulators are taking steps to address concerns about the potential misuse of cryptocurrencies for illegal activities. The Travel Rule is designed to introduce more transparency to crypto transactions by enabling VASPs to have better visibility into the counterparties involved in transactions. While authorities already possess the means to trace funds and collect information on counterparties when necessary, the Travel Rule provides VASPs with an enhanced framework to monitor transactions and assess the flow of funds between their customers and counterparties.

By enforcing stricter compliance standards, the rule aims to:

  • Reduce the anonymity associated with crypto transactions, which can be exploited for unlawful purposes.
  • Align the crypto industry with the same AML/CFT standards that govern traditional financial institutions.
  • Foster greater trust and legitimacy in the cryptocurrency space by allowing VASPs to better evaluate the transactions they facilitate.

For businesses like Finoa, compliance with the Travel Rule ensures that we maintain our standing as a responsible and transparent service provider in the fast-evolving digital asset industry.


What information will Finoa collect?

To comply with the Travel Rule, Finoa will be required to collect and transmit certain information for relevant transactions, as outlined in Regulation (EU) 2023/1113 (also known as the Transfer of Funds Regulation, or TFR). The type of data exchanged typically includes details related to both the sender and the recipient, such as identification information and wallet addresses.

While the exact data points may vary depending on the jurisdiction and the type of transaction, this information helps ensure transparency and traceability across the network. Importantly, this data will only be shared between regulated entities for compliance purposes.

 

Global adoption and the importance of compliance

As a global regulatory standard, the Travel Rule has been adopted by many countries across the world, including the European Union, United States, and Asian markets. For companies like Finoa, compliance with this rule isn’t just a legal requirement; it’s a vital step toward fostering greater trust and transparency in the crypto space.

While these new obligations may initially seem like additional administrative work, they are ultimately designed to protect participants in the digital asset industry. In an era of increasing regulatory scrutiny, businesses that proactively comply with rules like the Travel Rule are positioning themselves for long-term success in a more secure, transparent ecosystem.


A step toward a more transparent future

The Travel Rule marks a significant step in aligning the cryptocurrency space with the transparency standards of traditional finance. For Finoa clients, while this means new compliance requirements, it also represents a positive move toward creating a more secure and regulated environment for digital assets.

As of 30th December 2024, Finoa will fully adhere to the Travel Rule, ensuring that we continue to offer a compliant and trusted platform for all your crypto transactions. Together, we can navigate this changing regulatory landscape while maintaining our commitment to privacy, security, and excellent service.