The Challenge of Cross-Border Compliance

Each jurisdiction enforces its own version of crypto compliance, often with varying Know Your Customer (KYC), Anti-Money Laundering (AML), and Counter-Terrorist Financing (CFT) regulations. On top of that, the Travel Rule, which requires VASPs to exchange transaction details, is not universally enforced, leading to the Sunrise Issue, where compliant VASPs struggle to transact with non-compliant counterparties.

This often leads to inconsistent compliance expectations across borders, operational inefficiencies due to mismatched regulatory requirements, and increased risk exposure for VASPs engaging in cross-jurisdictional transactions.

A one-size-fits-all compliance approach doesn’t work in this environment. Instead, VASPs must adopt a flexible, scalable strategy that accommodates regulatory diversity while enabling growth.

For a deeper dive into 2025 compliance challenges and resolutions, check out this article.

Key Strategies for Cross-Jurisdictional Compliance

Use an Interoperable Travel Rule Solution

Since not all VASPs use the same protocol for Travel Rule compliance, firms need an adaptable and interoperable solution to ensure seamless transactions across different frameworks. Some rely on open protocols managed by industry groups or foundations, while others use privately managed systems developed and maintained by companies. Ensuring compatibility across these protocols is essential for secure, efficient, and scalable compliance operations in a fragmented regulatory landscape. 

Without interoperability, these protocols can become compliance silos, where VASPs struggle to exchange information across fragmented networks, leading to inefficiencies and transaction delays. By adopting a Travel Rule solution that supports multiple compliance networks, VASPs can break down these silos, avoid transaction bottlenecks, and maintain secure, reliable counterparties across jurisdictions.

Solve the Sunrise Issue Proactively

The Sunrise Issue presents a major hurdle for VASPs operating internationally. As some regions enforce Travel Rule requirements while others remain unregulated, compliant VASPs often face a compliance gap, where regulated entities must exchange information with unregulated counterparties.

How can VASPs address this challenge? Rather than waiting for global harmonization, compliance teams can take a proactive approach to onboarding and verification. Ensuring that counterparties meet basic compliance standards even in jurisdictions where regulations are still evolving, helps reduce transaction delays and mitigate regulatory risk.