Australia’s Travel Rule Just Broke Crypto Donations

$6. $6 is the amount that someone tipped Troy Hunt in crypto and Troy is the guy behind the website Have I Been Pawned. He’s got crypto and he’s got PayPal. But with the crypto side of things, because someone donated him that $6, he now has to report on who that person is, that he needs their name, he needs their address, he needs their birth date.

That’s an impossible task. So he’s going to ditch the whole crypto side of things and just go with PayPal. So this creates a brand new problem. And this is all because of the brand new travel rule that has come in place from Austrack.

I sat down with the CEO of CoinStash, Mena, and he talks through a couple of things and some holes that haven’t quite been patched yet, especially for anyone that is earning staking rewards. So if you’re delegating your ADA somewhere or you’re staking ETH or Solana, if you’re watching from the US or Europe, stick around and I’ll show you why in 40 seconds. Because these rules are what we’re just catching up to over there in the US. The FATF section 16 is what you have over there and we’re just playing catch up here.

Now on the 1st of July this year, Austrack’s new rule switched on. And this means every Australian transaction that goes in and out of regulated exchanges needs to have the identifying information from both sides. Now this isn’t new in principle, this is just the last part of Australia’s anti-money laundering laws that came into play in 2024, finally switching on. But here’s the part that makes Australia slightly different.

There’s no minimum threshold. In the US, you have a minimum threshold of $3,000. So anything below that, you don’t have to report where it’s coming and going, but anything above that, you do. So here in Australia, $5 requires the same amount of reporting as $50,000.

And that’s where this $6 donation really stuffs things up, because now you suddenly need the person’s birth date from that donation to be able to claim that $6. Now before we move on, this is specifically around Austrack’s travel rule and not ASIC’s digital asset framework, which will come into play early next year in 2027. So just want to make sure that’s clear. Because his address, his receiving address is directly to an exchange, they’re saying, where are these funds coming from?

But generally you’re receiving funds from yourself or a qualified VASP. So because people would donate from random places, he needs to change his addresses on his website to be his own self-hosted wallet, and that way there’s no friction on that. But at the same time, people who send him funds potentially from an exchange would also need to declare where they’re sending the funds to. So if they’re saying, oh, I’m sending it to Troy, that’s going to be an issue as well.

Because, well, again, it depends on the exchange that you’re working with if they have the ability to send to third parties. So now both ends are part of that checkpoint, and this is the part that isn’t really clear. So it’s usually receiving from myself or receiving from somebody else, or you can say I’m sending to myself or sending to an exchange. The third option, well, on the receiving side, it’s the receiving from a crypto mining operation of sorts, because there’s brand new crypto coins on the chain.

There’s no traceability back to where those coins came from. So then how do you even know what to do from there? It was quite an interesting discussion that we had in the office where people were arguing back and forth, and then originally it was like, oh, we can’t accept it. And then I was like, no, we have to accept it, even for the fact that it makes no sense that we shouldn’t.

But it’s because it hasn’t been thought up yet of how to deal with those situations. Is that the same with staking rewards from like Cardano, for example, the staking rewards coming from delegating to a stake pool, you get your rewards in Solana. Anything that’s produced as a reward that comes out of the blockchain, the exact same way staking is proof of stake, proof of work is what I was referring to on the mining side. My own SMSF actually earns Doge and Litecoin.

I have a bunch of script miners. So those coins coming into my coin slash SMSF account, in the beginning for me, it was flagged as what do we do from here? Even my dad’s mining operations had the same issue, and he called me up and he says, I don’t know what to click. Now, your ADA delegation, your staking rewards, the rewards just land in your account.

They magically appear from the protocol. So which one of these do you choose? You don’t have an option here that fits exactly what is happening. So none of them.

The protocol paid you. There’s no sender. There’s no counterparty. There’s nothing to declare.

There’s no box that fits the mold here. So if you’re staking or even mining crypto or Bitcoin, there’s an edge case here. So three gotchas here. The first one, you are now accountable for money you didn’t send.

Someone pays you back from their exchange account, and you’re the one being asked, who are they? Troy Hunt can’t KYC an anonymous donor, and you can’t KYC your mate. So the second one here, sending to a third party isn’t guaranteed to work. Whether you can do it at all, it all depends on your exchange licensing and how much you have spent on compliance.

Same transaction, different exchange, different answer. And then three, the third one here, and this one matters because panic posts online imply otherwise. Nothing is being confiscated. The transfer just hasn’t gone yet.

It’s questionnaire, not a seizure. If you can’t answer it, the funds stay where they are. There’s two angles you could look at that. The first would be that you’re better protected because when you look to send funds to a unregistered entity, that could protect you from losing those funds.

The other angle is obviously that they now know exactly where you’re sending funds and at all times, and you’re confirming it on your end. So it’s accountability to movement of funds from you. So those are the two angles you can look at it. It’s just more formalized now and more transparent to everyone to see what actually happens.

So that’s the thing that I keep coming back to here. The monitoring was always there. This isn’t new. They were always tracking what was going in and going out.

The surveillance was always there. What they’re doing now is just making you sign for it. Exchanges who are getting the licenses and well, we have to get the licenses obviously, but also exchanges who are spending more on compliance can then allow more actions to be done while we’re in the process of getting more licenses, credit license, for example, as well, not necessarily a financial AFSL. And then that enables more actions to be performed seamlessly for the customer.

And we’re in the process. It’d be clear what’s going to happen here. The exchanges with the biggest budgets and the ones that actually want to invest in compliance here in Australia, they’re the ones that are going to win out. So we’re going to see a lot of smaller exchanges probably disappear because they can’t afford the compliance work and licenses that are needed to actually make all this happen for them.

The obvious fix here that Troy could do for his donation page was simply to move the donation wallet to a self-custody wallet. Second donation that he’s received so far this year, and it’s already July. So it wasn’t a big use case and it wasn’t worth his effort even doing. It was easier for him just to close down that account and just simply stop accepting crypto as donations on his website.

So what can you do now? So Troy’s just giving up on the crypto side of things, but what can you do if you’re accepting crypto as payments or whatever it is you’re accepting money from your friends, your crypto from your friends, here are some things that you can do. Now, just to preference this, I’m not a financial advisor, I’m not an accountant, not a financial planner. So the first thing to do is to whitelist your self-custody wallets on the exchange.

Do that now. Don’t do it in the future when you need to move the funds. You can route all your funds through your own wallet and you can always say that the funds are coming from yourself, your own custody wallet to the exchange. Three, get your own self-custody wallet.

If you are accepting payments and donations, get your own self-custody wallet and publish that one so that money gets flowed through that particular address. And this is what Mena recommends as well. The fourth thing here is to learn about self-custody properly. Learn how to set up a wallet securely and safely.

And learning self-custody is probably the most important thing about the crypto space in general. And point five, split up your holdings. So you can have a cold wallet, a hardware wallet where you’re storing your assets for long-term holding. And then your exchange wallet where you are trading and moving funds.

One last thing before I go, this work around with self-custody wallets has a clock on it. There’s a deadline for this in Australia. So reporting on transfers involving unverified self-hosted wallets starts on the 31st of March 2029. So that buys you about two and a half years of clean operation.

So it’s not forever. And here is where we are today. No exchange can tell you which box to tick when the blockchain pays you itself. So staking rewards are still up in the air when it comes to the travel rule itself.

So leave a comment down below, guys. Let me know what you think. Did this video make the travel rule clearer for you guys? I’ve got YouTube memberships down below if you want to support me that way.

I’ve got buy me a coffee links there as well if you want to support that way. It’s a great way to support the channel. But if you can’t, just hit that thumbs up, like, subscribe, notification bell on your way out. Like always, guys, stay positive and I’ll see you in the next one.