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EU Finalizes Rules for Tracing Transfers of Crypto Assets

EU Finalizes Rules for Tracing Transfers of Crypto Assets

  • New rules mandate service providers to store information of wallets
  • Transactions from unhosted wallets will also be covered under the rules

The European Union (EU) has finalized rules for tracing transfers of crypto-assets like Bitcoin and electronic money tokens, to ensure the digital currencies can be traced like 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 crypto-assets will be traced and identified to prevent money laundering, terrorist financing, and other crimes, according to the new legislation.

Traceability from the first euro sent

The rules call for information on the source of the asset and its beneficiary travels with the transaction and crypto-assets service providers (CASPs) will be obliged to provide the information to authorities in an investigation related to money laundering and terrorist financing.

Curbing money laundering and terrorism financing

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

Negotiators have also agreed that the set-up of a public register for non-compliant and non-supervised CASPs, with which EU CASPs would not be allowed to trade, will be covered in the Markets in Crypto-assets rules (MiCA), currently being negotiated.

Unhosted wallets

Transactions from unhosted wallets will also be covered under the rules when they interact with wallets managed by CASPs.

In case a customer sends or receives more than 1000 euros to or from their own unhosted wallet, the CASP will need to verify whether the un-hosted wallet is effectively owned or controlled by this customer.

The rules do not apply to person-to-person transfers conducted without a provider, such as bitcoins trading platforms, or among providers acting on their own behalf.

Ernest Urtasun, a member of the European Parliament said the new regulations strengthen the European framework to fight money laundering, reduce the risks of fraud, and make crypto-asset transactions more secure.

He added that 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.
Ernest Urtasun, member of the European Parliament
Murtuza Merchant

Murtuza Merchant

Murtuza Merchant is a senior journalist, having been associated with various publications for over a decade. An avid follower of blockchain tech and cryptocurrencies, he is part of a crypto advisory firm that advises corporates – startups and established firms on media strategies.