The EU's strict regulations are paralyzing transfers between crypto exchanges: how not to lose your assets
The European Union has implemented such strict rules for cryptocurrency transfers that direct transactions between exchanges have turned into a real ordeal. Recently, a client of the Bybit EU platform encountered a deposit block of $899.7 in USDC sent via the Solana network. The system displayed a "Verification Failed" status, and the exchange recommended initiating a refund procedure through the Travel Rule refund function.
The cause of the problems lies not in technical glitches, but in the European Transfer of Funds Regulation (TFR), which fully came into effect in December 2024. This document extended the Travel Rule (mandatory disclosure of sender and recipient information) to all cryptocurrency transfers. Now, every transaction between licensed companies must contain full sender data, regardless of the amount. The receiving party is obliged to reject or freeze the payment if the information is insufficient.
Additional pressure on the market comes from the MiCA regulation deadline: from July 1, 2026, trading platforms without a special CASP license will lose the right to serve EU citizens. As a result, European investors are massively moving to regulated platforms, where strict TFR standards are now applied to all operations without exception.
Why does verification "stall"?
Critical Travel Rule data is currently transmitted through various competing systems that are poorly compatible with each other. If the sending exchange has not configured integration with the required service, verification on the receiving side fails. Users face lengthy manual checks, sudden rejections without explanation, and constant technical errors.
The case with USDC on the Solana network is far from isolated. In the comments on the affected trader's post, another investor also complained about similar difficulties, losing the ability to withdraw assets from Bybit EU.
How to protect your funds?
Independent on-chain analyst ZachXBT proposed a reliable action plan: send deposits to centralized platforms only from your own non-custodial addresses. Withdraw savings exclusively to personal storage. Any transactions to addresses of third-party exchanges or third parties should only be made after this intermediate step.
A transit transfer through your own wallet splits the direct sending into two independent operations. Transactions involving pure non-custodial wallets pass through automated regulatory compliance checks much more easily. Many commenters confirmed that they have long been sending funds to exchanges only through their own wallets. Other discussion participants reminded of technical loopholes: for example, in the Lightning Network, implementing Travel Rule requirements is technically impossible, and this network is now supported by many major trading platforms.
A group of investors called the incident a strong argument in favor of decentralized platforms (DEXs), which do not require user verification at all.
Expert opinion: The paradox of the situation is that government regulation, created for total transparency of inter-exchange operations, in practice forces people to choose tools where government oversight is completely absent. The strict EU rules not only fail to help combat money laundering (ZachXBT noted that in all his practice, he has never encountered real examples where the Travel Rule helped solve a crime), but also push users towards unregulated DEXs and anonymous networks. This is a classic case where the regulator's good intentions lead to the opposite effect.