Crypto travel rule

**Sherlock** · 20 November 2023, 12:10 pm

Recently saw that Bitfinex implemented this https://notabene.id/crypto-travel-ru...to-travel-rule

Other exchanges are or will be the same.

In short, unless coins are sent from proprietary wallet, they will be tainted, so the origin will be shown. I wonder how this will change the willingness of crypto exchanges to accept money from gambling.

Definitely not good news.

**tufty** · 20 November 2023, 12:23 pm

I've read a bit about this and I am still confused as to it's real life effects. If you are fully verified with an exchange, then surely that is all they need? They then have your info on file anyway.

Surely the exchange:
1) will assume that any incoming crypto to the exchange is from me. Every transaction comes from my own wallet address anyway - and never direct from a betting company.
2) will know who is sending it out from the exchange (me).

The main exchange I use has made no reference to this (yet). Though I have received emails from other exchanges about it. The more I read the more I don't quite understand how it will affect things. BACS, CHAPS, SEPA payments are already part of this (ie: they cant be made without the knowledge of who they go to and who they are sent from).

In short, the question is, how will this f*ck me up?

**Sherlock** · 20 November 2023, 12:48 pm

Most of crypto transactions nowadays are between exchanges=VASPs. So they will know very fast which transactions are NOT between VASPs.

Any transaction that will be coming out of the system (from your wallet or from affiliate program) will be much more suspicious, because there will be no "travel rule information" attached. The exchanges or banks have limited sources for KYC/AML, but if they can focus let's say on 5-10% of transactions (all including proprietary wallets), then it is not good. Only matter of time when all will be flagged and you will have to explain just like in a normal bank.

Another issue is where will the programs take their coins. I think that even now they rather buy at exchanges than use the funds of their customers. But then the money will be flagged. If they use their own wallets, the money will be flagged as well and blockchain analysis will show very suspicious movements, where hundreds or more smaller depositors put money to some central wallet from where we are paid from.

I think this was inevitable. Crypto will split to the black and white part. The grey will be diminished. We will be the black.

How exactly will this affect things is not possible to say, but something is happening.

**Sherlock** · 20 November 2023, 1:05 pm

I have no idea how the info will be sent. I did not find the info. Will it be something like colored coins? Will it be public (I doubt that)? SO it will be somehow encrypted, but how? Who will have the keys to read it? In the end, if there will be the keys only for VASPs, it is sure the info will leak. That is the nature of information. Then the data will end at blockchain analysis companies and they need just very small fraction of addresses to be identified to reveal the money flows.

I am curious.

**tufty** · 20 November 2023, 1:12 pm

It is stated that the travel rule is just to make crypto payments the same as fiat payments in terms of transparency.

So my assumption (or guess) has been that the confidentiality will be the same as with banks and fiat transfers. If you send a bank transfer then the sending bank and receiving bank know who is sending to who. That's it. They don't publish that info anywhere unless big brother comes asking.

**Sherlock** · 20 November 2023, 1:17 pm

Yes, that is what is written there, that the rules should be the same as for fiat.

But clearly there must be differences. When you are sending out money from exchange to some wallet, the exchange does not have idea where you are sending money to. You send it just to a wallet. It can be yours or another VASP. Will all exchanges voluntarily generate their addresses in format like bcbinanceXYZABC... ? Because if the VASP that is sending the money does not know to whom belongs the address, then they have no idea to where they have to send the info.

**content** · 20 November 2023, 2:15 pm

Seems there's been some degree of this going on in the past too.

Back in like 2015 I was banned from circle.com because they traced my transactions to LocalBitcoins (great margins back then if you bought market rate and provided bitcoin or liquidity in whatever other ways). Because LocalBitcoins was not licenced or this that or the other in their TOS. But never a problem when I withdrew to my own wallet.

Then in 2019(I think 2019 idk for sure) I was permanently banned from CashApp(still am) for using it to deposit for online gambling(and it was a fairly obscure casino too so I was surprised how they even traced it). Again, with them, you just got to withdraw to your own wallet before making deposits and withdrawals, I didn't think that was important. I learned gambling is against their TOS.

I can't imagine it could become really become very extensive. There's a lot of legitmate non-KYC services that are always going to be around, not just gambling. For example I use swapspace.co sometimes and it doesn't even require you to sign up, can trade an entire bitcoin for altcoins(let's say ethereum) on the front end of their site without signing in. Then I could go buy some ETH tokens from a token sale. Then I could sell those tokens for bitcoin on a DEX. Just some examples of non-gambling no-KYC uses that may be part of fairly normal crypto speculation use. I know damn well the IRS doesn't mind if I play on an unregulated by U.S. online casino and win a significant amount and report it on my taxes, they don't care I can literally write in on there I won bitcoin on random ass online casio as the income source, had to do that before and once back in USD my money was good with the bank too. Honestly just using a private wallet in between using a KYC and non-KYC source is probably enough, without intentional coin mixing or anything(and regular crypto enthusiasts engage in unintentional coin mixing all the time on uses like described).

I think it will be ok

**Strider1973** · 21 November 2023, 2:19 am

Bittrex just announced that they stop their services on Dec 4, 2023.

**Sherlock** · 21 November 2023, 7:22 pm

Originally Posted by content

Then I could sell those tokens for bitcoin on a DEX.

How will you do that? You can sell for WBTC, but not BTC. I did not follow taproot news, maybe there is some BTC friendly DEX already?

Blockchain analysis was here for long time. But this is different. Along with blockchain analysis, who knows..

**content** · 21 November 2023, 7:53 pm

Originally Posted by Sherlock

How will you do that? You can sell for WBTC, but not BTC. I did not follow taproot news, maybe there is some BTC friendly DEX already?

Blockchain analysis was here for long time. But this is different. Along with blockchain analysis, who knows..

I don't know, I figured there is but I could be wrong. Was just a hypothetical, I've never actually used a DEX, didn't realize they use WBTC. Main point that is I think realistically there will be never an absolute way to track source of funds on blockchain beyond one or two degrees of separation.

**allfreechips** · 21 November 2023, 9:16 pm

SO when you use ledger they send a full balance to the recipient and the raminder of a "chunk" yo an new address on your accout to keep addresses from being used more than once. Does this get around the issue? I had a transaction with a casino 2 yeear ago with coinbase and they shut my account down.

**Sherlock** · 22 November 2023, 7:05 am

Originally Posted by content

I don't know, I figured there is but I could be wrong. Was just a hypothetical, I've never actually used a DEX, didn't realize they use WBTC. Main point that is I think realistically there will be never an absolute way to track source of funds on blockchain beyond one or two degrees of separation.

On DEXes you can trade only the asset that is based on the underlying coin that is supporting smart transactions.
So on Uniswap for example which is based on ETH (not only nowadays), you can trade WBTC, wrapped Bitcoin, but that is not exactly BTC.
On Pancakeswap, based on BNB, you can trade wrapped BTCB etc.

Yes there is a way to track to unlimited degrees of separation for yeears. Just that tools are not that widely used.

In short this can be obfuscated. Through anonymous coins. Through mixers. Through CEXes. The crypto travel rule is aimed against the last option. Thee CEXes=VASPs, will report th transaction. How? We do not know. I am asking an owner of exchange.

**Sherlock** · 22 November 2023, 7:29 am

Originally Posted by allfreechips

SO when you use ledger they send a full balance to the recipient and the raminder of a "chunk" yo an new address on your accout to keep addresses from being used more than once. Does this get around the issue? I had a transaction with a casino 2 yeear ago with coinbase and they shut my account down.

What you say is what I always suggested here always. To not withdraw directly to an exchange. Not using address twice. (Which makes pretty costly transactions for USDT over ETH btw).

But crypto travel rule is something else described above.