In Switzerland a Virtual Asset Service Provider (VASP) - any financial intermediary dealing with crypto assets - is legally obliged to require proof of ownership of a customer's wallet address before withdrawals and deposits can be made. Trezor, one of the leading hardware wallet companies, is looking to simplify this process.
Hardware wallet manufacturer Trezor is the latest to integrate the Address Ownership Proof Protocol (AOPP), a solution for providing proof of wallet address ownership, in a move to comply with enhanced regulatory requirements for Virtual Asset Service Providers (VASPs) as set by the Swiss Financial Market Supervisory Authority (FINMA) in accordance with the Financial Action Task Force (FATF) Travel Rule.
Ownership proof for non-custodial wallets
As one of the most proactive regulators, FINMA’s implementation of the Travel Rule requires VASPs to verify that their customer owns the withdrawal address when transacting to and from non-custodial wallets (also called unhosted wallets). Transfers involving unhosted wallets not controlled by their clients are nearly impossible anymore. The user must prove they own the unhosted wallet using suitable technical means. Currently, most VASPs do this by asking users to submit a screenshot of their wallet or conduct a Satoshi Test, whereby a specific amount of coins are sent to a verified wallet to confirm their receipt.
“We see increased usage of non-custodial wallets, as the regulations in Switzerland are encouraging customers to transact outside of crypto exchanges. But the current verification processes are laborious and risky for consumers and compliance teams alike. Using AOPP, a VASP can accurately identify and transact with any non-custodial wallet and allow users to provide wallet ownership proofs easily, without manual effort. This greatly reduces the compliance costs and operational burden, while ensuring privacy and data protection for users and VASPs.” - Lucas Betschart, CEO of 21 Analytics
Marek Palatinus, CEO of SatoshiLabs, the maker of the Trezor hardware wallet, agrees with the sentiment. He thinks AOPP makes it simpler and faster for users to withdraw their crypto assets to a safe place for their coins. Swiss VASPs such as SEBA Bank and Relai, as well as hardware and software wallets Bitbox, BlueWallet, and Sparrow have also joined in implementing AOPP to increase user confidence and satisfy compliance requirements.
