First EU rules for tracing transfers of crypto-assets like bitcoins and electronic money tokens
Ensuring crypto-assets can be traced in the same way as traditional money transfers
The legislation is part of the new EU anti-money laundering package and will be aligned with the Markets in Crypto-assets rules (MiCA).
Transfers of cryptoassets will be tracked and identified to prevent money laundering, terrorist financing and other crimes, says new legislation agreed on Wednesday.
The European Parliament and Council negotiators reached a tentative agreement on a new draft law aimed at ensuring that cryptocurrency transfers can always be traced and suspicious transactions blocked.
Traceability from the first euro sent.
The agreement extends the so-called “travel rule”, which already exists in traditional finance, to cover transfers in crypto-assets. This rule requires information on the origin of the asset and its beneficiary to travel with the transaction and be stored on both sides of the transfer. Cryptoasset service providers (CASPs) will be obliged to provide this information to the competent authorities if a money laundering and terrorist financing investigation is conducted.
Given that crypto-asset transactions easily circumvent existing thresholds that would trigger traceability requirements, Parliament’s negotiators ensured that there are no minimum thresholds or exemptions for low-value transfers, as originally proposed.
With regard to the protection of personal data, including a name and address required by the travel rule, negotiators agreed that if there is no guarantee that the receiving end will maintain privacy, such data should not be sent.
Curbing money laundering and terrorist financing.
Before making cryptoassets available to beneficiaries, providers will have to verify that the source of the asset is not subject to restrictive measures or sanctions, and that there are no money laundering or terrorist financing risks.
Negotiators agreed that the creation of a public register for non-compliant and unsupervised CASPs, with which EU CASPs would not be able to trade, will be covered in the Markets in Cryptoassets (MiCA) rules, currently under negotiation.
The rules would also cover transactions from so-called non-hosted wallets (a cryptoasset wallet address that is in the custody of a private user) when interacting with hosted wallets managed by CASP.
In case a customer sends or receives more than €1000 to or from their own non-hosted wallet, CASP must verify whether the non-hosted wallet is actually owned or controlled by this customer.
The rules do not apply to person-to-person transfers made without a provider, such as bitcoin trading platforms, or between providers acting on their own behalf.
Ernest Urtasun (Greens/EFA, ES), co-rapporteur for ECON said: “This new regulation strengthens the European framework to fight money-laundering, reduces the risks of fraud and makes crypto-asset transactions more secure.
The EU travel rule will ensure that CASPs can prevent and detect sanctioned addresses and that transfers of crypto-assets are fully traceable.
This regulation introduces one of the most ambitious travel rules for transfers of crypto assets in the world. We hope other jurisdictions will follow the ambitious and rigorous approach the co-legislators agreed today.”
Co-rapporteur for LIBE Assita Kanko (ECR, BE) said: “For too long, crypto-assets have been under the radar of our law enforcement authorities. Terrorists used crypto for fundraising, to access to child pornography and criminals laundered their proceeds through it. This has really harmed people’s lives and raised doubts about the crypto sector.
Today, we have taken a big step to address these problems. It will be much harder to misuse crypto-assets and innocent traders and investors will be better protected. The extended travel rule will make that world safer”.
The Parliament, the Council and the Commission are continuing to work on the technical aspects of the text. The agreement must then be approved by the Economic and Monetary Affairs and Civil Liberties and Justice Committees and the full Parliament before it can enter into force.