New rules to stop illicit Crypto transactions in the EU

European Commission | Release | Mar 31, 2022

On Thursday, MEPs from the Committee on Economic and Monetary Affairs (ECON) and the Committee on Civil Liberties (LIBE) adopted, with 93 votes to 14 and 14 abstentions, their position on draft legislation strengthening EU rules against money laundering and terrorist financing.

 

Traceability of transfers of crypto-assets

 

Under the new requirements agreed by MEPs, all transfers of crypto-assets will have to include information on the source of the asset and its beneficiary, information that is to be made available to the competent authorities.

See:  Preventing money laundering and terrorist financing – traceability of crypto-asset transfers

The rules would also cover transactions from so-called unhosted wallets (a crypto-asset wallet address that is in the custody of a private user).

Technological solutions should ensure that these asset transfers can be individually identified.

Ernest Urtasun (Greens/EFA, ES), co-rapporteur for ECON said:

“Illicit flows in crypto-assets move largely undetected across Europe and the world, which makes them an ideal instrument for ensuring anonymity. As illustrated by all the recent money-laundering scandals, from the Panama Papers to the Pandora Papers, criminals thrive where rules allowing for confidentiality allow for secrecy and anonymity. With this proposal for a regulation, the EU will close this loophole.”

The aim is to ensure that crypto transfers can be traced and suspicious transactions blocked. The rules would not apply to person-to-person transfers conducted without a provider, such as bitcoins trading platforms, or among providers acting on their own behalf.

See:  Distributed ledger technology: member states endorse agreement reached with European Parliament

 

No minimum thresholds

 

Due to their speed and virtual nature, crypto-asset transactions easily circumvent existing rules based on transaction thresholds. MEPs decided therefore to remove minimum thresholds and exemptions for low-value transfers.

 

Public register of high-risk entities

 

MEPs want the European Banking Authority (EBA) to create a public register of businesses and services involved in crypto-assets that may have a high risk of money-laundering, terrorist financing and other criminal activities, including a non-exhaustive list of non-compliant providers.

 

Before making the crypto-assets available to beneficiaries, providers would have to verify that the source of the asset is not subject to restrictive measures and that there are no risks of money laundering or terrorism financing.

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