Non-Custodial Wallet Flow

The non-custodial wallet flow is used for transactions to self-hosted wallets where the beneficiary controls their own private keys without a custodial VASP intermediary.

Flow Overview

graph TD
    A[1. Create Transaction] --> B[2. Mark as Non-Custodial]
    B --> C[3. KYC Approval for Beneficiary]
    C --> D[4. Add Originator Details]
    D --> E[5. Send to Beneficiary - Auto Skip]
    E --> F[6. Submit Transaction Hash]
    F --> G[Transaction Complete]

Key Differences from Standard Flow

1. No Beneficiary VASP: Transaction goes directly to a self-hosted wallet
2. Simplified Flow: No beneficiary VASP approval needed
3. Enhanced KYC: May require additional verification for non-custodial transfers
4. Auto-Skip Steps: System automatically skips VASP-to-VASP communication steps
5. Direct Settlement: Funds sent directly to beneficiary's wallet address

Complete Step-by-Step Guide

Step 1: Create Transaction

Create a transaction destined for a non-custodial wallet.

Endpoint: POST https://api.trpcontinuum.com/trp/transactions

{
  "network": "bitcoin",
  "virtualAsset": "Bitcoin (BTC)",
  "amount": "50.25",
  "beneficiaryWalletAddress": "bc1qxy2kgdygjrsqtzq2n0yrf2493p83kkfjhx0wlh",
  "originatorWalletAddress": "bc1qabc123def456ghi789jkl012mno345pqr678stu",
  "memo": "Payment to non-custodial wallet",
  "transactionType": "non_custodial"
}

Response:

{
  "success": true,
  "data": {
    "id": "txn_noncustodial_789",
    "status": "Pending Beneficiary Details",
    "network": "bitcoin",
    "amount": "50.25",
    "transactionType": "non_custodial",
    "beneficiaryWalletAddress": "bc1qxy2kgdygjrsqtzq2n0yrf2493p83kkfjhx0wlh",
    "createdAt": "2024-08-07T11:00:00Z"
  }
}

Step 2: Mark as Non-Custodial

Identify the transaction as going to a non-custodial wallet and add beneficiary details.

Endpoint: POST https://api.trpcontinuum.com/trp/transactions/{transactionId}/add-beneficiary

{
  "isNonCustodialWallet": true,
  "isLegalPerson": false,
  "beneficiaryFirstName": "Jane",
  "beneficiaryLastName": "Smith",
  "dateOfBirth": "1990-05-15",
  "placeOfBirth": "New York, NY",
  "buildingNumber": "123",
  "streetName": "Main Street",
  "townName": "New York",
  "postCode": "10001",
  "country": "US",
  "beneficiaryIdNumber": "123456789",
  "beneficiaryIdType": "PASSPORT",
  "beneficiaryIdCountryOfIssue": "US",
  "walletOwnershipProof": {
    "method": "signature",
    "signedMessage": "I own wallet bc1qxy2kgdygjrsqtzq2n0yrf2493p83kkfjhx0wlh",
    "signature": "H1234567890abcdef..."
  }
}

Important: The isNonCustodialWallet: true flag triggers the non-custodial flow.

Response:

{
  "success": true,
  "data": {
    "transactionId": "txn_noncustodial_789",
    "status": "Non-Custodial Wallet Identified",
    "beneficiaryType": "non_custodial",
    "walletVerificationStatus": "pending",
    "enhancedDueDiligenceRequired": true
  }
}

Status Change: Pending Beneficiary Details → Non-Custodial Wallet Identified

Step 3: KYC Approval for Beneficiary

Approve KYC for the non-custodial wallet beneficiary with enhanced due diligence.

Endpoint: POST https://api.trpcontinuum.com/trp/transactions/{transactionId}/kyc-check/approve

{
  "note": "Non-custodial wallet KYC approved with enhanced verification",
  "verificationLevel": "enhanced",
  "walletOwnershipVerified": true,
  "riskAssessment": {
    "overallRisk": "medium",
    "factors": [
      "non_custodial_wallet",
      "enhanced_verification_completed",
      "wallet_ownership_verified"
    ]
  },
  "additionalVerifications": {
    "addressOwnershipConfirmed": true,
    "signatureVerified": true,
    "identityDocumentsReviewed": true,
    "sourceOfFundsDocumented": true
  }
}

Response:

{
  "success": true,
  "data": {
    "transactionId": "txn_noncustodial_789",
    "status": "KYC Approved - Enhanced",
    "approvalDetails": {
      "approvedBy": "compliance_officer_002",
      "approvalTime": "2024-08-07T11:15:00Z",
      "verificationLevel": "enhanced",
      "validUntil": "2024-08-07T23:59:59Z"
    }
  }
}

Status Change: Non-Custodial Wallet Identified → KYC Approved - Enhanced

Step 4: Add Originator Details

Add originator information.

Endpoint: POST https://api.trpcontinuum.com/trp/transactions/{transactionId}/originator-details

{
  "isLegalPerson": false,
  "originatorFirstName": "John",
  "originatorLastName": "Doe",
  "originatorDob": "1985-03-20",
  "originatorPlaceOfBirth": "Chicago, IL",
  "originatorIdNumber": "987654321",
  "originatorIdType": "PASSPORT",
  "originatorIdCountryOfIssue": "US",
  "originatorAddressLine1": "456 Oak Street",
  "originatorCity": "San Francisco",
  "originatorState": "CA",
  "originatorPostalCode": "94102",
  "originatorCountry": "US",
  "relationship": "business_partner",
  "transactionPurpose": "payment_for_services"
}

Status Change: KYC Approved - Enhanced → Originator Details Added

Step 5: Send to Beneficiary (Auto-Skip)

This step automatically handles non-custodial logic.

Endpoint: POST https://api.trpcontinuum.com/trp/transactions/{transactionId}/send-to-beneficiary

{}

Automatic Behavior:

• System recognizes non-custodial flag
• Skips VASP-to-VASP communication
• Creates direct payment authorization
• Updates status to ready for blockchain transaction

Response:

{
  "success": true,
  "data": {
    "transactionId": "txn_noncustodial_789",
    "status": "Ready for Transaction",
    "paymentAuthorization": {
      "authorized": true,
      "authorizationId": "auth_noncustodial_456",
      "validUntil": "2024-08-07T23:59:59Z"
    },
    "skipReasons": [
      "non_custodial_wallet_detected",
      "no_beneficiary_vasp_communication_required"
    ]
  }
}

Status Change: Originator Details Added → Ready for Transaction

Step 6: Submit Transaction Hash

Submit the blockchain transaction hash after on-chain transfer.

Endpoint: POST https://api.trpcontinuum.com/trp/transactions/{transactionId}/tx-hash-submit

{
  "txHash": "0xabcdef1234567890abcdef1234567890abcdef1234567890abcdef1234567890",
  "note": "Transaction sent to non-custodial wallet",
  "blockNumber": 18456791,
  "gasUsed": 21000,
  "transactionFee": "0.0001",
  "confirmations": 1,
  "networkFee": "0.00005",
  "actualAmount": "50.24995"
}

Response:

{
  "success": true,
  "data": {
    "transactionId": "txn_noncustodial_789",
    "status": "Completed",
    "blockchainInfo": {
      "txHash": "0xabcdef1234567890abcdef1234567890abcdef1234567890abcdef1234567890",
      "blockNumber": 18456791,
      "confirmations": 1,
      "networkFee": "0.00005"
    },
    "completedAt": "2024-08-07T11:45:00Z",
    "transactionType": "non_custodial"
  }
}

Status Change: Ready for Transaction → Completed

Status Progression

1. Pending Beneficiary Details
2. Non-Custodial Wallet Identified
3. KYC Approved - Enhanced
4. Originator Details Added
5. Ready for Transaction
6. Completed

Enhanced Due Diligence Requirements

Wallet Ownership Verification

Before approving transactions to non-custodial wallets:

1. Signature Verification

   • Beneficiary signs a message with their private key
   • Message includes wallet address and timestamp
   • Signature verified against wallet's public key

2. Address Validation

   • Confirm address format matches specified network
   • Verify address hasn't been flagged for illicit activity
   • Check against sanctions and blocked address lists

3. Identity Confirmation

   • Enhanced document verification
   • Video call verification for high-value transactions
   • Proof of residence documentation

Risk Assessment Factors

Low Risk Indicators:

• Verified wallet ownership
• Clear transaction purpose
• Regular business relationship
• Small transaction amounts (under $1,000)

Medium Risk Indicators:

• New business relationship
• Moderate amounts ($1,000-$10,000)
• Cross-border transactions
• First-time non-custodial transaction

High Risk Indicators:

• Large amounts (over $10,000)
• High-risk jurisdictions
• Suspicious transaction patterns
• Unable to verify wallet ownership

Documentation Requirements

Maintain records of:

• Wallet ownership proofs (signatures, screenshots)
• Identity verification documents
• Risk assessment results
• Transaction monitoring alerts
• Compliance officer approvals

Compliance Considerations

Regulatory Requirements

Travel Rule Compliance:

• Collect required beneficiary information
• Maintain transaction records for 5+ years
• Report suspicious activities to authorities
• Implement ongoing monitoring

Enhanced Monitoring:

• Real-time sanctions screening
• Pattern detection for structuring
• Velocity checks for frequent transactions
• Cross-reference with law enforcement databases

Record Keeping

Essential records for non-custodial transactions:

• Beneficiary identification documents
• Wallet ownership verification proofs
• Risk assessment documentation
• Compliance approval records
• Transaction monitoring results

Common Use Cases

1. Personal Wallets

Users withdrawing to their own hardware or software wallets

• Verification: Signature-based ownership proof
• Risk Level: Low to medium
• Monitoring: Standard velocity checks

2. DeFi Interactions

Sending funds to DeFi protocols or smart contracts

• Verification: Contract address validation
• Risk Level: Medium to high
• Monitoring: Enhanced due to smart contract risks

3. Cold Storage

Moving funds to cold storage solutions

• Verification: Multi-signature proof may be required
• Risk Level: Low
• Monitoring: Standard compliance checks

4. P2P Transactions

Direct peer-to-peer transfers

• Verification: Enhanced identity verification
• Risk Level: Medium to high
• Monitoring: Enhanced monitoring for suspicious patterns

Risk Mitigation Strategies

Transaction Limits

Implement graduated limits based on verification level:

Verification Level	Daily Limit	Monthly Limit	Single Transaction
Basic	$1,000	$10,000	$500
Enhanced	$10,000	$100,000	$5,000
Premium	$50,000	$500,000	$25,000

Enhanced Monitoring

Real-time Checks:

• Sanctions screening for wallet addresses
• Blockchain analytics for address history
• Pattern detection for suspicious behavior
• Cross-referencing with law enforcement databases

Post-Transaction Monitoring:

• Confirmation tracking on blockchain
• Destination address monitoring
• Follow-up verification for large amounts
• Periodic review of transaction patterns

Best Practices

1. Wallet Ownership Verification

• Always require cryptographic proof of ownership
• Implement time-limited challenges to prevent replay attacks
• Verify signatures against multiple message formats
• Maintain audit trail of all verification attempts

2. Risk-Based Approach

• Implement graduated verification levels
• Adjust limits based on customer risk profile
• Consider transaction history and patterns
• Regular review and update of risk parameters

3. Documentation Standards

• Standardize verification procedures
• Maintain comprehensive audit trails
• Document all compliance decisions
• Regular training for compliance staff

4. Technology Integration

• Automated signature verification systems
• Integration with blockchain analytics tools
• Real-time sanctions screening capabilities
• Automated suspicious activity detection

5. Customer Communication

• Clear explanation of verification requirements
• Transparent fee structures for non-custodial transfers
• Educational resources about wallet security
• Prompt notification of transaction status updates