5 Reasons Why Top VASPs Choose TRP
With the release of the Transfer of Funds Regulation (TFR) and the Market in Crypto Assets Regulation (MiCA), as well as the gradual implementation of the Financial Action Task Force's (FATF’s) Recommendation 16, Virtual Asset Service Providers (VASPs) have needed to up their compliance regime.
Due to the FATF’s, TFR’s and MiCA’s added compliance requirements, VASPs have had to seek technical solutions to continue their day-to-day operations.
Irrespective of which technical solution a VASP selects, the solution will use a protocol.
In our previous blog, What Is the Travel Rule Protocol (TRP)? We explained exactly what a protocol is in more detail and its meaning within the Travel Rule context.
What Is TRP?
The Travel Rule Protocol (TRP) is a free standard for permissionless communications between VASPs. It meets the regulatory requirements stipulated by the FATF’s Travel Rule and the EU’s TFR by enabling compliance with anti-money laundering (AML) and counter-terrorism financing (CTF) regulations.
Why Do Top VASPs Choose TRP? Let’s dive in
The TRP Advanced Workflow
TRP’s Advanced Workflow offers VASPs many benefits. However, one of the most attractive functionalities is the ability to accept and decline transactions.
VASPs now have the power - at their fingertips - to accept or decline a transaction before the transfer takes place.
Why is this good news for VASPs?
Added security:
VASPs can immediately decline transactions from sanctioned countries or individuals before dedicating any time to the transaction,
The payment address is only visible after the payment has been accepted, removing the chance of unwanted transactions,
VASPs can scrutinize transaction details before going ahead with the transaction.
Time saved:
No time is spent on transactions that are not compliant.
No time is spent quarantining coins and figuring out how and where to return them.
2. The TRP Travel Address
The FATF’s Travel Rule stipulates that VASPs need to send Travel Rule information if the beneficiary has a custodial account at another VASP.
A common and big problem encountered by VASPs is that they do not know to whom the address belongs.
A VASP can ask their client for this information. However, a client may not be forthcoming with their answers or could make a mistake.
What the Travel Address does is it provides the VASP with imperative information, controls and enhancements. Such as:
To which VASP the coins should go,
To which address the coins should go,
Enhanced privacy for the user,
No mixups between custodial and non-custodial wallets,
The opportunity to do sanction checks (for the beneficiary!) prior to revealing the virtual asset address.
It replaces the virtual asset address and functions similarly to traditional banking’s IBAN. Moreover, it helps a VASP make a Travel Rule-compliant transaction!
3. Travel Rule Compliance
VASPs can be rest assured that all transactions done using TRP can easily meet the FATF Travel Rule’s standard and be compliant.
4. TRP Offers Complete Control
With TRP, VASPs have complete control, allowing users to build on the protocol themselves or use a compatible solution from a provider. It is designed to be easily implemented while solving the Travel Rule needs.
TRP allows for the use of various extensions. These extensions can be used to modify or add to the protocol. The only prerequisite is that the VASPs signal support for a particular extension in their communication.
Furthermore - unlike other protocols - there is no vendor lock-in.
Oftentimes, when VASPs enlist the services of protocol from a provider, they are locked in. This means that even if they are dissatisfied with the service, it is often costly to move their operations from the provider's server to another one. Due to this cost and effort, VASPs often stick with the protocol that they are dissatisfied with.
Or worst-case scenario, there is no second option, and the VASP would need to start their service from scratch, which is time-consuming and pricey.
TRP is different in this regard, as there is no vendor lock-in. If VASPs are dissatisfied, they can easily terminate their contracts and seek a new option or build it themselves.
5. Decentralization
TRP is fully decentralized, meaning there is no single owner or centralized control. It is open to contributions from the industry to further develop it. Additionally, it is royalty-free with no hidden costs or catches.
Decentralization is paramount in protocols used by serious VASPs who value their clients’ privacy.
Curious to know more about TRP? Click here.