PSA The Travel Rule is NOT a RULE!

https://www.bitstamp.net/learn/security/what-is-the-travel-rule/

From the article:

The Travel Rule is a term used to refer to a recommendation from the Financial Action Task Force (FATF) designed to combat money laundering and terrorism financing. In the context of crypto assets…

The article itself is, in my opinion, a pretty interesting read and highlights the primary reason I'm moving away from CEXs as much as possible. They're already putting policies into place that aren't required by any sort of law, at least that's what I'm gathering from the article. I'm in the US and there is NOT A FEDERAL LAW that requires the gathering of the receivers information.

While there isn't a specific federal law yet that explicitly requires crypto exchanges to gather information about the recipient in every transaction, the regulatory landscape is complex and evolving. Here's a breakdown of the key factors:

1. The Bank Secrecy Act (BSA)

• Core Principle: The BSA is the primary anti-money laundering (AML) law in the U.S. It requires financial institutions, which now include crypto exchanges, to implement AML programs that include Know Your Customer (KYC) requirements.
• Focus on Senders: Traditionally, KYC laws have focused heavily on verifying the identity of the sender to prevent money laundering and illicit activities.
• Shifting Landscape: Recent proposed regulations from the Financial Crimes Enforcement Network (FinCEN) aim to extend KYC requirements to include information about the recipient in certain crypto transactions. This is particularly focused on transactions above certain thresholds or those involving "unhosted" wallets (wallets not held by a financial institution).

2. Proposed Regulations

• The "Travel Rule": FinCEN has proposed a rule that would require crypto exchanges to collect and share information about both the sender and receiver for transactions over $3,000. This rule is modeled after existing regulations for international wire transfers.
• Unhosted Wallet Rule: Another proposed rule would require exchanges to collect information on the recipient for transactions over $10,000 involving unhosted wallets.

3. Current Practices

• Varying Standards: While not universally mandated, many exchanges already collect some information about recipients, especially for larger transactions or as part of their risk management practices.
• Enhanced Due Diligence: Exchanges may conduct enhanced due diligence on recipients if they are flagged as high-risk based on factors like transaction size, frequency, or geographic location.

4. Future Outlook

• Increased Scrutiny: The regulatory focus on crypto transactions is intensifying, and it's likely that more stringent requirements for collecting recipient information will be implemented in the future.
• Balancing Privacy and Security: The challenge lies in balancing the need to prevent financial crimes with protecting user privacy.

In summary: While not yet a universal requirement, the trend is clearly towards greater transparency and information collection on both senders and recipients in crypto transactions. Exchanges are increasingly implementing measures to comply with existing and anticipated regulations.