Edward Farina, a crypto trader, has denounced how Crypto.com applied the travel rule to his XRP deposit on the exchange before the law came into effect in the European Union. The travel rule, named Regulation (EU) 2023/1113, seeks to require additional information about those involved in a “travel” transaction along with the transfer of funds with cryptocurrencies and digital money. It is part of the MiCA Law, a set of rules that will determine the operation of cryptocurrency exchanges from 2025.
I returned to my home country and sent 12 $XRP as proof. Even though the “travel rule” doesn’t go into effect until December 30th, crypto.com refused to automatically credit my funds. It’s December 27th and I won’t be traveling, so why is crypto.com already violating my rights?
Edward Farina, a cryptoasset trader
According to Farina, the travel rule is being enforced prematurely, which he believes is a violation of his rights. In addition, it is being “incorrectly applied” because he made the transaction from his home country, not while traveling. However, the application of the travel rule does not depend on the country where one is. It applies in the entire European Union and in other jurisdictions that have adopted the recommendations of the Financial Action Task Force (FATF).
“You have a pending deposit of 12.0 XRP to your XRP wallet. We will notify you when your deposit has been confirmed.” Source: X profile, @edward_farina
The application of this travel rule has been common, for example, in the United Kingdom . Also in Canada. This obligation to comply is not new, even though it will come into force on the penultimate day of December throughout the European Union: it has been applied irregularly by some countries around the world.
Some users are not bothered by the data interception measure, and claim that the deposits are only slightly slower than before. Others point out that the control of private information by states, centralized institutions and governments poses a vulnerability for individuals, and recommend self-custody.
What is the travel rule?
The “travel rule” refers to the “journey” of information, not of the user, based on the principle that at each financial institution through which it passes, the accompanying information of the sender and beneficiary of the funds must be recorded. In this way, institutions that “ensure” compliance with EU financial and anti-money laundering laws can request data on a digital economic transaction and intercept funds deemed illicit at any point in time.
In short, and according to the Official Journal of the European Union, the travel rule, which already applied to current transactions and will begin to apply to cryptoassets as of December 30, will impose “the obligation on payment service providers to accompany fund transfers with information on the payer and the beneficiary in a uniform manner” throughout the EU. The generalized travel rule comes with the entry into force of the second phase of the so-called MiCA Law.
According to Notabene, a company that offers compliance advisory services, the requirements requested from financial platforms, such as exchanges, regarding users in the European Union are the following: name of the issuer, account number, physical address, national identity number, customer identification number or date and place of birth . The information collected from the beneficiary is more limited. According to the same company, “the usual reporting transaction threshold is 1000 USD, although in the United States it is 3000 USD.”
The identity information collected about users must be transmitted to the financial institution receiving the funds, which can be another exchange or a bank, along with the transfer of funds. In addition, financial institutions must keep records of the information for at least five years, and constantly report suspicious transactions to regulators.
