EU policymakers and the Council of the European Union gathered for talks this week, announcing new anti-laundering regulation for crypto transfers, requiring digital wallet providers to verify customer identities.
The decision follows the European Parliament vote in March calling for measures and more transparent information to stop digital assets from being used in illicit transactions for drugs, child pornography and terrorism.
Cryptocurrency is a digital currency exchanged in verified transactions by a decentralised system using cryptography, rather than by a centralised authority.
Ernest Urtasun, Spanish Green Party lawmaker, said about the changes: “The new rules will enable law enforcement officials to be able to link certain transfers to criminal activities and identify the real person behind those transactions’.
In a statement, the European Parliament said: “Crypto-assets service providers (CASPs) will be obliged to provide this information to competent authorities if an investigation is conducted into money laundering and terrorist financing.”
Private unhosted crypto wallets however will not be subject to AML checks in a departure away from initial proposals. Payments to unhosted wallets over 1,000 euros will still have to be reported in line with regulation in traditional banking.
Some critics have opposed the changes to make crypto transfers more traceable, arguing that this hampers innovation in the sector.
Paul Grewal, Chief Legal Officer at Coinbase said, denouncing the decision, “If adopted, this revision would unleash an entire surveillance regime on exchanges like Coinbase, stifle innovation, and undermine the self-hosted wallets that individuals use to securely protect their digital assets.” He subsequently urged others to take a stand and make their voices heard prior to the vote.
The Transfer of Funds Regulation (TFR) agreement is now expected to be formally approved by the Parliament and the EU Council, with France handing over its presidency of the EU Council to the Czech Republic which could confirm the deal.