What is Travel Rule?

Travel Rule is the common name for regulatory expectations (notably FATF Recommendation 16) that virtual asset service providers (VASPs) and, in many jurisdictions, obliged entities handling crypto transfers must collect, verify, and exchange originator and beneficiary information when transmitting value, similar in spirit to wire-transfer rules for fiat. In practice, it means:

For transfers involving another custodian or exchange (a VASP), the sending and receiving sides typically exchange structured Travel Rule protocol (TRP) messages (often carrying IVMS101-style identity payloads) so each party knows who is on the other side of the transaction.
For transfers to or from self-hosted wallets (addresses controlled outside a VASP), regulators still expect risk-based measures: identifying whether the wallet is the customer’s own versus a third party, and in higher-risk situations proving control of the address (for example, via a signed message or liveness-backed verification).

Why product teams care

Compliance: Reduces the risk of processing transfers without adequate counterparty information.
Operations: Transfers may be delayed, held, or rejected until identity and ownership obligations are met or until counterparty screening completes.