What is the Travel Rule?
In 2019, the Financial Action Task Force (FATF), a global international anti-money laundering and counter-terrorist financing watchdog, extended its anti-money laundering and counter-terrorist financing (AML/CFT) measures to virtual assets (VA) and virtual asset service providers (VASPs). The Travel Rule, also known as FATF Recommendation 16, is a set of guidelines designed to prevent money laundering and terrorist financing. The Travel Rule mandates that VASPs obtain and disclose details pertaining to the sender and recipient of a virtual asset transfer to counterpart VASPs or financial institutions, either during the transaction or prior to it.
Overview of Travel Rule in Singapore
The Monetary Authority of Singapore (MAS) regulations (PSN02 on AML/CFT, para 13) require additional counterparty information when a user receives a deposit from outside Coinbase or withdraws to a non-Coinbase destination address. In order to comply with these requirements, Coinbase may not be able to process a user’s crypto transfer if counterparty information is not available. Actions will include blocking withdrawals or placing holds on deposits from outside Coinbase.
Withdrawing Crypto Assets outside of Coinbase
In order for Coinbase to comply while minimizing disruption of service, users are required to whitelist all destination addresses to their Address Book prior to being able to complete a withdrawal off the Coinbase platform. Singapore users will have unique requirements when adding addresses to their address book.
See Related Articles for more information on the Address Book
Address Book Requirements
The following are requirements for Singapore users on Coinbase Exchange:
Attestation of wallet ownership - Users are required to attest to ownership of the address.
Wallet Type - Users must select whether the address is associated with an Exchange or Self Hosted Wallet
Exchange - Users will be prompted with a list of Virtual Asset Service Providers (VASPs) approved in the jurisdiction. Users will only be allowed to withdraw to an address hosted by an approved VASP.
Self Hosted Wallet - When withdrawing a self hosted wallet, users will be prompted with a list of compatible wallets. Once selected, the user will be required to verify ownership via a digital wallet signature. Only assets on the Ethereum blockchain (ETH and ERC20s) are supported at this time.
If a user is unable to provide any of the required information above or if the address is not registered to an approved VASP, the user will not be able to transfer funds to that address.
Updating Addresses in the Address Book
All addresses added to the user’s address book before the regulatory updates will remain unavailable to the user to withdraw to until all required information is provided. Within the Address Book the user will see a status stating ‘Needs Updating’ for any addresses with incomplete information.
Select ‘Needs Updating’ to populate the additional information related to the address. Once the information is input and saved, the address will be eligible for external withdrawals.
Depositing Crypto Assets to Coinbase
MAS regulation requires that Coinbase collect information of the address depositing funds into a user’s account. In order to comply with regulations while minimizing disruption of service, users are required to log all originating addresses and attest to ownership of those addresses in order to access their assets. A Depositor Information log is available to document information related to incoming deposits.
Depositor Address Information Requirements
A Depositor Information log requires a user populate the following information:
Wallet Address - Populate the originating address of the (expected) deposit
Attestation of wallet ownership - Users are required to attest to ownership of the address.
Name - Name of the user associated with the depositing address. This field is auto-populated when the user attests to ownership
Country - Country of the user associated with the depositing address. This field is auto-populated when the user attests to ownership
Adding depositor information can be done proactively in advance of a deposit or reactively after funds are received by navigating directly to the Depositor Information log or after a deposit has been received within the Deposits Tab in Coinbase Exchange. Please note, a hold will be placed on funds received in an account in which the originator address information has not been verified.
Deposits Placed in a Hold State
A hold will be placed on a deposit to a user’s account if there is no information provided on the originating address of the deposit. When funds are placed on hold, the user can see the balance credited to their account, however, they will not be able to use those funds to place orders or to send off the Coinbase platform.
To release the hold on the funds, the user will need to navigate to the Deposits Tab. On the Deposits tab, the user will see the status of recent transfers. For any deposits on hold related to the Travel Rule, the user will be able to select the item which will prompt the user to populate the required depositor address information. Once the address information is saved, the hold on the funds will be released. Future deposits from that address will NOT be subject to a hold and users will have immediate access to their funds.
If a user is unable to confirm the required information or attest to ownership of the address, please contact Coinbase Exchange support to release the hold on the deposit.
Frequently Asked Questions
How to withdraw funds to a VASP? The MAS requires that Travel Rule information be sent from one institution to the other in a crypto transfer, which can only be done if both institutions use the same Travel Rule compliance solution(s). Coinbase Exchange will therefore require a selection of the VASP in control of the destination address prior to withdrawing funds. If the user is unable to answer this question or if the VASP is not supported by the same Travel Rule compliance solution used by Coinbase, we recommend that the user withdraw funds to a self hosted wallet.
How to withdraw funds to a Self Hosted Wallet? In order to confirm ownership of a self hosted wallet, Coinbase Exchange will require the user to connect to their wallet and perform two-step verification via a digital signature. Coinbase Exchange will support a number of self hosted wallets. Please note, at this time only assets on the Ethereum blockchain are supported.