The US Travel Rule WG (USTRWG) is a regional travel Rule solution designed to allow US-based MSB’s licensed by FinCEN to implement and comply with the US Travel Rule rapidly.

Unlike many industry initiatives, USTRWG members believe that the Travel Rule must first be solved locally. Since the US has the oldest Travel Rule regulation through the Bank Secrecy act, the USTRWG designed their protocol explicitly to comply with the FinCEN rules first and not necessarily the FATF guidelines.

This article covers factors to consider when choosing USTRWG as a Travel Rule messaging protocol.

How does USTRWG work?

The USTRWG solution incorporates two separate components to address the Travel Rule: (1) a centralized bulletin board used to identify the correct counterparty, allowing Sending and Receiving VASPs to connect with one another, and (2) an encrypted P2P channel to securely transfer the requisite PII.

  1. The originating customer receives the beneficiary address from the beneficiary
  2. The originating customer provides the beneficiary address to originating VASP
  3. If a transaction is over $3000, the originating VASP posts the beneficiary address to the US Travel Rule WG board
  4. The beneficiary VASP replies to the originating VASP, acknowledging that the address is theirs
  5. The originating VASP transmits PII to the beneficiary VASP through a peer to peer method
  6. The originating VASP submits the transaction to the blockchain
  7. The transaction arrives in the beneficiary’s account

Similar to TRP, each VASP using USTRWG provides an API endpoint, yet USTRWG adds a centralized bulletin board to solve the ‘discovery’ problem, the identifying of which VASP is behind an address. The bulletin board shows a wallet address and which VASP owns it. The Beneficiary VASP then replies privately to claim the transaction.

Is USTRWG an open-sourced industry alliance network, a closed network, or a commercial solution?

The USTRWG is a closed network that comprises a group of large VASPs, including Bitgo, Coinbase, Gemini, etc. To join USTRWG, VAPSs must have an active MSB License from FinCEN. Page nine of USTRWG’s whitepaper says, “The beta solution will initially serve U.S. VASPs to comply with FinCEN requirements and will evolve over time to support additional jurisdictions in future phases.” 

Is USTRWG a fully integrated Travel Rule solution provider?

USTRWG is a protocol. VASPs will still need to partner with a fully integrated Travel Rule solution provider or build additional components to integrate USTRWG. 

What is the integration effort?

The integration effort of USTRWG is currently unknown.

Is USTRWG interoperable with various protocols and Travel Rule solutions?

Although USTRWG’s Travel Rule data payload will adhere to the InterVASP Messaging Standards, IVMS101 (page 31, USTRWG whitepaper), the USTRWG was explicitly designed only for communication with US-based group members.

What is USTRWG’s governance model?

USTRWG is run by its participants.

Does USTRWG support non-custodial wallets?

USTRWG does not support communication with non-custodial wallets. However, the solution requires custodial services to prove that they own an address in a Travel Rule transaction.

Is USTRWG live?

The USTRWG is not live yet. However, there has been mention of a testnet in Q4 2021.

What is the level of industry support for USTRWG?

USTRWG is supported by a group of the large US-based exchanges: Coinbase, Fidelity, Gemini, Kraken, Bitgo, Bitstamp, Paxful, Trade Station, Anchorage, Paxos, etc.

What is USTRWG’s membership fee structure?

There is a nominal membership fee to join USTRWG, ~15,000 USD.

Does Notabene support USTRWG? 

Notabene will add support for USTRWG once the protocol is live. However, given this is a membership-only protocol, our customers who want access to it will have to apply independently to become members.

What are the benefits of using USTRWG?

  • Access to Tier 1 US exchanges

A VASP that uses USTRWG could send transactions to the large US-based VASPs.

What are the drawbacks of using USTRWG?

  • Designed to be closed

This solution cements a walled garden that limits transactions to only those within the network through a centralized messaging system. Only exchanges that pass the strict membership criteria will be able to transact with each other, thus directly halting the global aspect of cryptocurrency flow. 

  • Restrictions on international transfers

The WG specifically designed this solution not to be able to handle international transfers. Only US-based licensed MSBs are allowed to use this with each other.

  • No interoperability support/Additional integrations needed to continue a global business flow

US-based MSBs will still need to implement one of the open international protocols such as TRP or OpenVASP to continue to be part of the global VASP ecosystem.

  • No service provider support

The working group has not yet opened up the protocol to allow service providers to join.

Has there been a testnet using USTRWG?

There has been mention of a USTRWG testnet in Q4 2021.

What are the steps to implementing USTRWG?

The steps to implementing USTRWG are currently unclear.

Relevant links:

USTRWG via Wayback Machine | USTRWG Travel Rule Solution