MPC Solutions vs Multisig Solutions for FATF Travel Rule Compliance

Key advantage: Transaction signing occurs off-chain, shielding sensitive counterparty data from public view. This enables privacy-preserving compliance where only the VASP nodes in the MPC network see the data. This matters for protocols prioritizing user privacy (e.g., privacy-focused wallets or exchanges) and for creating a seamless user flow that doesn't expose compliance steps.

Key advantage: Compliance logic (e.g., sanctions screening, threshold checks) is embedded directly into the cryptographic signing protocol via smart contracts or threshold scripts. This allows for real-time, atomic enforcement of rules before a transaction is valid. This matters for automated, high-volume environments (e.g., institutional trading desks) where manual review for every transfer is impossible.

Key advantage: Built on native blockchain primitives (e.g., Ethereum's Safe{Wallet}, Bitcoin's native multisig). No reliance on external TSS providers, reducing third-party trust and integration complexity. This matters for teams with deep in-house blockchain expertise who prioritize sovereignty and auditability over advanced features, and for protocols already using multisig for treasury management.

Key advantage: All compliance actions (approvals, rejections) are on-chain events, creating an immutable, transparent audit trail for regulators. Transaction fees are also predictable native gas costs. This matters for VASPs in highly regulated jurisdictions (e.g., EU under MiCA) requiring unambiguous proof of compliance and for operations where budget predictability is critical.

On-Chain Transparency & Auditability: Every transaction and signer approval is immutably recorded on the blockchain (e.g., Ethereum, Polygon). This provides a perfect, verifiable audit trail for regulators. Established Standards: Integrates with existing smart contract infrastructure and tools like Safe{Wallet}, enabling complex governance via modules. Key Trade-off: Sender/Receiver Identity is Opaque. The multisig only manages funds; it cannot natively attach or verify the PII required for the Travel Rule (e.g., name, address, account number). Requires a separate, compliant off-chain data pipeline.

Built for Institutional Compliance: Solutions like Fireblocks and Copper are designed as full-stack platforms with integrated Travel Rule modules (e.g., integration with Notabene, Sygna Bridge). Off-Chain Privacy with On-Chain Settlement: Transaction signing occurs off-chain in a trusted execution environment, allowing the platform to attach, encrypt, and verify compliance data before broadcasting a single, signed transaction. Key Trade-off: Vendor Lock-in & Cost. You rely on the MPC provider's proprietary infrastructure, key management, and compliance APIs, which can be more expensive than open-source multisig setups.

Your compliance data pipeline is already solved. You use a dedicated Travel Rule service provider (e.g., Notabene, Veriscope) and only need a secure, on-chain treasury wallet. You prioritize self-custody and decentralization. You want full control over signing keys and governance, using battle-tested code like Safe Smart Accounts. Your transactions are lower volume but high value. The gas overhead of on-chain approvals is acceptable for fewer, larger transfers.

You need an all-in-one compliance stack. You require seamless integration of identity verification (KYT/KYC), transaction screening, and automated Travel Rule reporting within the same platform. You operate an exchange or high-volume VASP. You need scalable, low-latency transaction signing with built-in policy engines (allow/deny lists, velocity limits). Developer resource efficiency is critical. The MPC provider abstracts away key management, backup, and rotation complexities, reducing internal dev ops burden.