The EU will ask cryptocurrency players to identify interested parties starting with a € 1 transaction

The European Parliament and the Council have reached an interim agreement that obliges cryptocurrency players to provide identifying information on cryptocurrency transactions.

End of the suspension for the TFR regulation (for the “Fund Transfer Regulation”). This regulation, which aims to apply measures against money laundering, had been under negotiation for several months between the various European institutions in Brussels (European Parliament, Council of the EU and European Commission).

On Wednesday evening, the European Parliament and the Council of the EU reached a “provisional agreement” on this regulation. MEP Ernest Urtasun, rapporteur for this draft regulation, announced the news on his Twitter account. “We are putting an end to the Wild West of unregulated cryptocurrencies by filling major gaps in European anti-money laundering regulations,” he said.

What does this regulation contain?

Cryptographic service providers will become “obligated” entities under the Fourth Anti-Money Laundering Directive.

The TFR regulation will apply “to all transactions to / from Crypto Asset service providers (or CASP, in other words digital asset service providers -PSAN- in France) starting from the first euro. This therefore concerns all exchanges (centralized exchange platforms, such as like Binance, Coinbase, etc. With TFR, CASPs will need to collect a large amount of private information about any party involved in a transaction.

The TFR legislation will also apply to transfers from / to so-called “non-hosted” wallets (also called cold wallets, such as the Ledger wallet) to a CASP.

“Verification of the identity of the beneficial owner of the non-hosted wallet will be mandatory for transfers exceeding € 1,000 in the event that the transfer is made to or from the wallet belonging to the CASP client,” adds Ernest Urtasun.

Transfers between non-hosted wallets will not be affected by the transaction. For example, this will be the case of an individual with cryptocurrencies on a non-hosted wallet who wishes to transfer them to another non-hosted wallet (of another individual, for example).

“This text is a real step forward. The European Parliament has greatly improved it by working in good spirit with the Council and the Commission. We would have liked it to be more ambitious, of course, but it already improves the situation considerably. And there is an urgent need. to fill some legal loopholes, “MEP Aurore Lalucq, who participated in the work on this regulation, told BFM Crypto.

The European Union is “making it more difficult for criminals to misuse cryptocurrencies for criminal purposes,” the EU Council said in a press release Wednesday.

“The new agreement will enable the EU to address the money laundering and terrorist financing risks associated with these new technologies, while at the same time reconciling competitiveness, consumer and investor protection and the protection of financial integrity. Internal market” , reads the statement.

“Harmful” regulation according to the cryptocurrency sector

On the side of the cryptocurrency industry, it’s time for disappointment.

“This interim agreement dedicates Europe’s necessary efforts to establish a harmonized framework, guardian of fair competition within the European crypto-asset markets, which is now proving to be detrimental to digital asset service providers. , such as those already registered under national regimes, particularly in France, “regrets Faustine Fleuret, president of the association for the development of digital assets (Adan), with BFM Crypto.

For the latter, the implementation of this regulation poses many problems.

“On the one hand, operational in the absence of European solutions. These are essential as guarantors of our digital sovereignty and the protection of strategic information and data on these new markets. On the other hand, in terms of competitiveness of the sector at an international level while Europe is moving faster and faster. It is regrettable that the scope of the TFR covers all transactions in cryptocurrencies (starting with the first euro) and those between platforms and “unhosted wallets.” Finally, if supervision is not followed, this it will ultimately prove detrimental to European industry in the face of its foreign competitors. The regulation will therefore not achieve its objectives “, adds the latter.

It had been several months since the cryptocurrency industry, through the voice of Ledger boss Pascal Gauthier, had warned of the risks of such a decision at the European level. In a letter sent to policy makers in late April, members of the cryptocurrency industry had recommended “never exceeding the recommendations of the Financial Action Task Force (FATF)”, the intergovernmental body for combating money laundering.

For example, FATF Recommendations 15 and 16 are considered to be taken to the extreme, as are the measures AML (Anti Money Lauding) and KYC (for “Know Your Client” or “know your customer”, a system to verify the identity of a customer) from the first euro. Similarly, for the cryptocurrency company, the TFR would not respect the privacy rights of Europeans.

When will this regulation come into force?

If a political agreement has been reached, technical discussions will take place in the coming months before reaching a final agreement on implementation.

The TFR regulation should come into force when the MiCa regulation (for the cryptocurrency market) applies, explains the MEP.

“At the latest 18 months after entry into force, the Commission will assess the need to revise the regulation to add measures to mitigate the risk of non-hosted portfolios,” stresses Ernest Urtasun.

We recall that the objective of the European regulation on transfers of funds (TFR) is the fight against money laundering and the financing of terrorism. Dating back to 2015, this regulation was reopened in 2021 to introduce cryptocurrencies. In July 2021, the Commission carried out in particular a impact analysis on the cryptocurrency sector, for the Council and the European Parliament.

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