Why the Travel Rule Protocol (TRP) Trumps Other Protocols
With the increased implementation of the Financial Action Task Force’s (FATF’s) Travel Rule, more and more virtual asset service providers (VASPs) are seeking out Travel Rule solutions.
When implemented, the Travel Rule mandates VASPs to exchange originator and beneficiary information to transact; a protocol is required to communicate this information between entities.
Below, Harm Aarts, CPO of 21 Analytics, explains how the Travel Rule Protocol (TRP) is the perfect protocol for compliance officers and software developers.
Harm's expertise lies in combining his deep technical knowledge with business. Currently, he tries to make the least possible software using Boring Old Technology in DiskNotifier and recently took a deep dive into the world of Self Sovereign Identity.
How Does TRP Solve the Challenges That the Travel Rule Brings?
I am really happy with how TRP solves the virtual asset service provider (VASP) discovery problem. As an alternative to the wallet user giving a virtual asset address to the VASP, he can also provide a Travel Address to his VASP. The Travel Address is like an IBAN; it contains the beneficiary VASP that controls the address. Therefore, instantly and unambiguously identifying the counterparty.
What Is the Discovery Problem?
The Travel Rule requires VASPs to send customer information to their counterparty, as a crypto transfer must be accompanied by personally identifiable information (PII).
However, a common wallet address contains no information on the VASP that holds it. So, how to know where to send the required Travel Rule data - this is the discovery problem.
How Does this Benefit VASPs?
From an end user’s perspective, the notable change is the use of the Travel Address. It allows for instant transfers. While with other solutions out there, that is far from guaranteed.
What Is the Travel Address?
The best thing since sliced bread. For everyone familiar with IBANs, it is that: an IBAN for virtual assets. For everyone not familiar with IBANs, the Travel Rule solves the discovery problem. Consider the Old World; you get a Bitcoin address, you send coins, done. However, in the new situation, you need to gather beneficiary data. To whom are you going to send it? You only have a Bitcoin address that doesn’t tell you anything. Sure, you can run it through your favourite on-chain analytics tool, but that will only give you a guess. Not a certainty. You then must take this Bitcoin address and start asking your counterparties (do you have them all on file?) if, perhaps, they control this address. Long story short, the Travel Address fixes this. The Travel Address contains the counterparty VASP. As an originator, you immediately know.
Read: Is There a Difference Between an IBAN and a Travel Address?
What Separates TRP from Other Protocols?
TRP is unique in the sense that it is truly decentralised. There is no central component in the protocol to make it work. VASPs using TRP do not yet get another business dependency, nor do they leak competitively sensitive information. Their communications with their counterparties remain private. Not only is it really decentralised, but its specifications are open. Anyone can take it and implement it.
What Is Your Favourite Feature of TRP?
I wouldn’t call out a specific feature but the overall design of the protocol. It has an obvious design; the protocol messages are simple, and only three small steps are required to finish a transfer. Yet it remains flexible enough for all use cases. It doesn’t use complicated or experimental technology.
In fact, the building blocks of TRP are existing technologies like IVMS101 and Legal Entity Identifiers. Using these technologies, the protocol is stable, and engineers can easily implement it due to their familiarity with the tools. Also, we regularly host workshops in which engineers with no prior background information are able to implement TRP in under two hours.
Just How Easy Is It to Implement TRP?
Very! We host workshops regularly, but we also released a ton of tools to support the engineers. We’ve open-sourced several libraries, linked below;
and we created several online tools to help everyone along; have a look at our website under resources!
Read: TRP Workshop: Implementing the Open Travel Rule Standard
What Does a VASP Need to Support TRP?
Very little, actually! Implement the specification (which we made easy with our publicly available tools and libraries). It’s really quite short; even our CEO was able to do it. And then publicly announce that you did so and start exchanging messages!
Can You Explain the TRP Flow?
I’ll do this in a list because I think that best shows how straightforward it is.
Gather the beneficiary data
Ask the beneficiary VASP for permission to send coins their way
If approved by the beneficiary VASP, do the on-chain transaction
There is no step 4.
What Is TRP’s Relationship with OpenVASP?
This is some source of confusion. Currently, the OpenVASP Association stewards the TRP protocol. The Association hosts the weekly meetings and pays for some development and marketing. Previously there was a protocol called OpenVASP, but that has been confined to the history books.
What Are the Weekly TRP Meetings?
The TRP meeting (call) is where all interested parties gather weekly to discuss the protocol and recent regulatory changes. It’s an informal group of people; like the protocol itself, everyone is invited. This is the place where we discuss technical changes to the protocol or examine particular use cases.
Why VASPs Should Choose TRP
TRP is the only protocol 100% compliant with FATF’s Recommendations. Moreover, it is
easy to implement into existing solutions and technologies,
truly permissionless,
decentralised and an open standard.
TRP is the only free, truly peer-to-peer standard where no centralised parties are involved (just like Bitcoin).
Find out how TRP can help your team today.
