What the rule requires
What has to travel
Four items, in the standard implementation.
The sender’s name, their account or wallet identifier, their address or date of birth or a national ID number, and the recipient’s name and identifier. This information moves between the two service providers rather than being written onto the blockchain, which is a point people frequently misunderstand.
The threshold is typically 1 000 dollars or euros, set by each jurisdiction. Below it, simplified requirements apply or none at all.
Who it binds
Regulated intermediaries, called virtual asset service providers or VASPs: exchanges, custodial wallets, payment gateways, brokers and anyone converting between crypto and fiat.
It does not bind individuals. Sending Bitcoin from your own wallet to another wallet you control, or to a friend, involves no VASP and no reporting requirement. This is worth stating clearly, because the rule is sometimes described as though it applied to every transfer on a blockchain.
The obligation attaches to the service, not to the network.
Where it gets complicated
The sunrise problem
The rule is implemented unevenly, and the industry has a name for the resulting mess.
Jurisdictions adopted it at different times and with different thresholds, so a compliant provider in one country routinely transacts with a provider in another that has no obligation to send anything back. The compliant side cannot obtain what it is required to collect.
Providers handle this with a patchwork: bilateral arrangements, shared messaging protocols, and in some cases refusing transfers to counterparties who cannot reciprocate. Nothing about it is elegant, and it explains why an exchange occasionally asks where a withdrawal is going.
Self-hosted wallets
The awkward case, and jurisdictions differ.
When you withdraw to a wallet you control yourself, there is no VASP on the other side to receive the information. Some regulators require the provider to collect and verify ownership of the destination address anyway. Others require collection without verification. The European approach under MiCA and its accompanying rules is among the stricter, and it is why some exchanges now ask you to prove an address is yours.
What a merchant needs to know
Two things, and both are reassuring.
Selling goods or services and accepting payment does not make a business a VASP. The Travel Rule obligation sits with your payment gateway, which collects what it needs during KYB and handles the rest without involving you.
And your customers are not affected. A payer sending from their own wallet to an address the gateway generated triggers no requirement on them, which is consistent with how KYC applies in this arrangement: the business is verified, the payer is not, and transaction screening covers the rest through KYT.