$BTC
The Satoshi Test is a method used in the cryptocurrency industry—especially among Virtual Asset Service Providers (VASPs)—to help comply with the Travel Rule, a regulation from the Financial Action Task Force (FATF) that requires certain information to accompany cryptocurrency transactions between regulated entities.
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🌍 What Is the Travel Rule?
The Travel Rule mandates that when a cryptocurrency transfer is made between two VASPs, both parties must exchange identifying information about the sender and recipient. This rule is designed to prevent money laundering and terrorist financing.
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🧪 What Is the Satoshi Test?
The Satoshi Test is a way for one VASP to verify the ownership or control of a wallet address by another VASP before sharing sensitive Travel Rule data. It involves sending a small, traceable amount of cryptocurrency (often just a few satoshis, the smallest unit of Bitcoin) to a wallet address to confirm that the address is indeed controlled by the receiving VASP.
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✅ How It Helps with the Travel Rule
1. Verification of Ownership:
Before sending user information, VASPs want to ensure that the counterparty owns the wallet.
The Satoshi Test proves control of the address without revealing user data prematurely.
2. Privacy Protection:
Reduces the risk of sharing personally identifiable information (PII) with the wrong entity.
3. Fraud Prevention:
Helps prevent sending sensitive information to bad actors posing as legitimate VASPs.
4. Compliance Assurance:
Adds a layer of due diligence, aiding in regulatory compliance and audit readiness.
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🐳 The Image Analogy
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