Parliament and Council negotiators reached a tentative agreement on Wednesday on new legislation aimed at ensuring cryptocurrency transfers can be traced and block any suspicious transactions.
Tracking of the transfer of the first euro
The agreement aims to extend the “travel rule” — already in place in traditional finance — to transfers of crypto assets. The rule states that information about the source of the asset and its beneficiaries must “travel” with the transaction and be stored on both sides of the transfer. Crypto-asset service providers will be required to provide this information to the relevant authorities in the event of an investigation of money laundering and terrorist financing.
Since crypto-asset transactions can easily overcome existing thresholds that would lead to traceability requirements, Parliament negotiators have confirmed that there are no minimums or exceptions for transferring assets, which is a small amount, as initially proposed.
Regarding the protection of personal data, in particular the name and address required by the “travel rule”, the negotiators considered that if there is no guarantee of protection of personal data at the end of the chain, this information should not be transmitted.
Anti-money laundering and terrorist financing
Before making crypto assets available to beneficiaries, service providers must verify that the source of the asset is not subject to restrictive measures or penalties, and that there is no risk of money laundering or terrorist financing.
The negotiators agreed to create a public registry for crypto-asset service providers that do not meet applicable standards or are not subject to oversight, with which European asset service providers are not allowed to trade. This registry will be covered by the Regulations for Crypto Asset Markets, currently under negotiation.
The rules will also cover transactions made by non-hosted wallets (the address of a crypto-asset wallet held by a private user) when interacting with wallets managed by crypto-asset service providers.
If a customer sends or receives more than €1,000 to or from their non-hosted wallet, the service provider must verify whether the non-hosted wallet is actually owned or controlled by that customer.
The rules do not apply to transfers of crypto assets between individuals that take place without service provider involvement, such as bitcoin exchanges, or between service providers acting on their own initiative.
Ernst Ortason (Greens / EFA, ES), Co-Rapporteur of the Committee on Economic and Monetary Affairs, said: “This new regulation strengthens the European anti-money laundering framework, reduces fraud risks and conducts transactions. It not only ensures that crypto-asset service providers can block and detect sanctioned addresses, but But also that crypto-asset transfers are more secure and fully traceable. In addition, they introduce one of the most ambitious “travel rules” for crypto-asset transfers in the world. We hope other jurisdictions will follow the ambitious and rigorous approach that the participating lawmakers agreed to today.” .
Assita Kanko (ECR, BE), Co-Rapporteur of the Commission on Civil Liberties, Justice and Home Affairs, added: “For far too long, crypto assets have remained under the radar of our law enforcement authorities. Terrorists have used cryptocurrencies to raise money, kid pornography, and criminals are using them to hide their activities. “This has already affected many lives and raised concerns for the industry. Today we have taken an important step to address these issues. It will be much more difficult to misuse crypto assets and innocent traders and investors will be better protected. An extension of the ‘travel rule’ will make the world safer.”
Parliament, the Council and the Commission are now working on the technical aspects of the text. Before the agreement enters into force, it must be approved by the Economic Affairs and Civil Liberties Committees, and then by Parliament as a whole.