Travel Rule

The Travel Rule is a regulatory requirement that financial institutions transmitting funds must pass along identifying information about the sender and recipient with the transfer. Extended to crypto by the FATF's guidance, it obliges exchanges and other virtual asset service providers (VASPs) to share originator and beneficiary details, such as names and account identifiers, when transferring crypto between platforms above certain thresholds.

The rule exists so that crypto transfers between regulated businesses carry the same audit trail as bank wires, making money laundering and sanctions evasion harder. For example, when a customer withdraws bitcoin from one exchange to their account at another exchange, the sending platform must transmit the customer's identifying information to the receiving platform through a secure messaging protocol; several industry systems have been built specifically to carry this data alongside the on-chain transaction.

A common misconception is that the Travel Rule puts personal data on the blockchain; the identity information travels through separate off-chain channels between the institutions, not in the transaction itself. Implementation varies by jurisdiction in thresholds, timing, and how transfers to self-custody (unhosted) wallets are handled: some regimes require exchanges to collect information about, or verify ownership of, private wallets receiving withdrawals. For users, the rule mostly surfaces as extra questions when withdrawing to an external address, such as being asked who owns the destination wallet.