How Do Regulators in Different Jurisdictions (E.g. US Vs. EU) View the Application of the Travel Rule to Unhosted Wallets?

Regulators have differing views. In the US, FinCEN has proposed rules that would require VASPs to collect and store information for transactions involving unhosted wallets above a certain threshold, placing the burden on the regulated entity.

The EU, under its Transfer of Funds Regulation (TFR), has taken a stricter stance, requiring VASPs to verify the identity of the unhosted wallet owner for any transaction amount, which presents significant technical challenges. Both approaches signal a move away from treating unhosted wallets as outside the regulatory perimeter, but their methods and thresholds for enforcement differ.