Travel Rule compliant VASPs face several challenges in identifying their counterparties pre-transaction. The lack of a standardized way for linking blockchain addresses to counterparties and the complexity of dealing with different sorts of counterparties creates uncertainty about who is on the other side of a transaction—critical data for triggering Travel Rule compliance procedures.
Recent insights underscore this issue: a majority of surveyed VASPs have expressed a need for a universal identification method in line with existing Travel Rule protocols, and 52% of respondents reported to send Travel Rule transfers to all VASPs without applying any criteria or counterparty due diligence process. [1] This issue could lead to regulators imposing widespread restrictions on transacting unless a counterparty is identified.
To address this gap, Notabene releases Network Discoverability, a privacy-preserving mechanism for identifying VASPs through blockchain addresses.
Introducing Network Discoverability
We've recently launched the Network Discoverability, a feature that empowers in-network VASPs to securely auto-identify blockchain addresses. This addition to our product suite feature reflects our commitment to equipping Compliance Officers with robust tools, ensuring seamless interactions with counterparties while upholding stringent security and compliance standards.
How does Notabene’s Network Discoverability help you?
With Notabene's Network Discoverability, in-network VASPs can quickly and reliably identify their counterparties in real time. This feature ensures adherence to the Travel Rule’s due diligence mandates and streamlines transactional efficiency by eliminating unnecessary redundancies in verifications.
- Efficient and Accurate Transaction with Trusted Counterparties: The Network Discoverability feature allows VASPs to automatically identify blockchain addresses on both ends, ensuring data is directed to the correct party. This enhances the speed and accuracy of transactions.
- Enhanced Security: VASPs can safely share their encrypted blockchain addresses within Notabene's Network by opting in, ensuring that hashed addresses remain confidential and irreversible.
- Reduces Transaction Friction: Removing the need for end-user input at the transaction level enables VASPs to increase reachability and reduce transaction friction and latency.
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A comparative overview: before and after Network Discoverability
Without Network Discoverability: When an Originator VASP A sends a Travel Rule transaction, the Beneficiary VASP must repeatedly claim the blockchain address. If Originator VASP B sends a transaction to the same address, it must go through the steps to discover the VASP behind the transaction to the same address. VASPs may need to ask the end customer to identify the counterparty VASP, and the Beneficiary VASP must claim the address again, which adds to overall transaction latency.
With Network Discoverability: VASPs share cryptographically hashed versions of their blockchain addresses, which are stored privately in a segregated database. If any VASP sends a transaction to that address in the future, the system quickly provides the hashed address, automatically verifying it for the sender.
Network Discoverability is a testament to Notabene's innovative approach to Travel Rule compliance, enhancing SafeTransact’s existing suite of services. VASP Discoverability accelerates and simplifies verification for all involved parties, by securely storing and disseminating encrypted blockchain addresses across a cooperative network. By opting into this feature VASPs are able to leverage the power of the Notabene Network, reduce friction for their end users, and increase the speed in which Travel Rule messages are created.
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[1] Notabene (2023), “State of Crypto Travel Rule Compliance Report,” page 39.
