MiCA vs. the Travel Rule: What’s the difference for transaction screening and why it matters
Crypto compliance is changing fast, and if you’re running a digital asset business, you’ve probably heard about two big regulations: MiCA and the Travel Rule. They both deal with making crypto transactions safer with transaction screening, but here’s the kicker: they do very different things.
If you’re feeling lost about how these regulations apply to your business, don’t worry, we’re breaking it down for you with real-world examples to help you connect the dots.
MiCA vs. The Travel Rule: two sides of the same coin?
Think of MiCA and the Travel Rule like two security checkpoints at an airport.
- MiCA transaction screening is like the security scan before you board, making sure nothing suspicious is happening before and after the transaction.
- The Travel Rule is like customs, ensuring that when money moves between platforms, both the sender and receiver’s details travel with it, so regulators know who’s involved.
While both aim to prevent financial crime, they do it in different ways, at different points in a transaction, and with different requirements.
The key differences between MiCA and Travel Rule requirements
1. Purpose: risk monitoring vs. transparency
- MiCA’s transaction screening requirements are all about detecting suspicious activity and stopping fraud, market abuse, or illegal transactions. It requires crypto businesses (CASPs) to monitor transactions continuously.
- The Travel Rule is about transparency: making sure that when crypto is sent, key details about the sender and receiver are shared between platforms.
Example:
Imagine you’re a crypto exchange in the EU. Under MiCA, you’d need to use compliance tools to flag unusual activity, like a sudden high-volume transaction from a previously inactive account. The Travel Rule, on the other hand, ensures that when someone withdraws funds to another platform, their identity information travels with the transaction.
2. Timing: before, during, or after transactions?
- MiCA transaction screening happens before and after a transaction. Businesses need to monitor transactions for fraud, risk, and regulatory violations both in real-time and retrospectively.
- The Travel Rule applies before a transaction is completed. The required sender and receiver information must be exchanged between crypto platforms before the transaction is completed, though enforcement timing may vary by jurisdiction.
Example:
If you’re running a French crypto payment service, before sending funds, you must check if the recipient’s wallet has been flagged for illicit activity (MiCA screening). At the same time, you also need to share the transaction details with the recipient’s service provider (Travel Rule compliance).
3. Who needs to comply?
- MiCA transaction screening requirements apply only to the EU, affecting all Crypto Asset Service Providers (CASPs) operating in the region.
- The Travel Rule is global, following FATF guidelines that many countries (including the EU) enforce.
Example:
A UK-based VASP sending funds to an EU-based CASP? The Travel Rule applies. A Spanish CASP handling a customer’s transactions? MiCA rules apply. A Singaporean exchange transacting with a French platform? Both apply.
4. Technology & compliance challenges
MiCA and the Travel Rule require different technical setups:
- MiCA transaction screening relies on risk detection, behavioral analytics, and real-time fraud monitoring, which can be performed with AI-powered compliance solutions like ComPilot.
- The Travel Rule requires ISO 20022-compatible messaging systems, to securely exchange customer data between platforms.
Example:
If your business already has an AML monitoring tool but no way to share customer data with other exchanges, you’re not fully compliant with the Travel Rule. Likewise, if you only have a Travel Rule solution but aren’t actively screening for fraud, you’re missing the MiCA requirements.
Cross-border complexity: why this matters for your business
Here’s where things get even trickier. Not every country enforces the Travel Rule the same way, and MiCA is EU-specific, meaning businesses operating internationally need a solution that works across multiple regulatory frameworks.
Example:
A transaction between a German CASP and a UAE VASP must follow:
- The Travel Rule’s FATF standards (used worldwide)
- MiCA’s stricter screening requirements (which the UAE platform might not be fully prepared for)
The result? Compliance headaches. The German CASP must ensure MiCA-compliant transaction monitoring, while the UAE VASP may not have the same requirements, creating gaps in regulatory expectations and technical compatibility.
How to stay compliant without the chaos?
Instead of juggling multiple tools for MiCA and the Travel Rule, you need a unified compliance solution that does both!
That’s where ComPilot comes in.
- Integrated MiCA transaction monitoring and (coming soon) Travel Rule compliance in one place
- Automated AML screening and fraud detection to flag suspicious transactions
- Fully adapted for Web3 businesses
- Secure data-sharing protocols
- Customizable compliance rules for different jurisdictions
Whether you’re a CASP, VASP, or any crypto business handling transactions, you can’t choose between MiCA or the Travel Rule, you need to comply with both. ComPilot makes that simple. Want to see how it works? Get in touch at contact@compilot.ai or book a demo with our compliance experts team.
