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On Thursday, 31st of March, the European Parliament will vote on de-anonymizing cryptocurrency wallets. The council will decide on whether or not exchanges should be required to collect key information on all the cryptocurrency deposits and withdrawals. This is the EU’s version of the Financial Action Task Force (FATF) Travel Rule, which was expanded to include cryptocurrency in 2019.
After narrowly defeating a ban on proof-of-work currencies, the EU Parliament has now turned its focus to private cryptocurrency wallets. On Thursday, members will vote on an updated Transfer of Cash Regulation (TFR), which would compel exchanges and other crypto providers, among other things, to check the identity of intended receivers when users transmit funds rather than just collecting them. The Financial Action Task Force’s (FATF) Travel Rule has taken a long time to be implemented, but its interpretation goes further than the standards require.
As Patrick Hansen, Unstoppable Finance’s head of strategy and business development, posted on Twitter on March 26th: Unfortunately, I am once again ringing the alarm bell. The EU Parliament does not leave us with any choice.
As part of the upcoming crypto Anti-Money Laundering regulation (TFR), unhosted wallets are targeted for a clampdown.
Thursday is the date for the European Parliament Committee on Economic and Monetary Affairs (ECON) vote, and there are some major red flags in the draft.
Implementation of Travel Regulations Affects the EU
New FATF regulations, including the Travel Rule, were approved in July 2019 but have taken a long time to execute, prompting the G20 to call for a faster implementation date in year 2020. The TFR, which is the EU Parliament’s own interpretation of the Travel Rule, appears to have finally gotten the message.
The EU’s implementation, as crypto policy specialist Patrick Hansen pointed out on Twitter over the weekend, goes beyond the Travel Rule’s criteria and carries multiple red flags.
He asserted that as part of such transactions, exchanges must “verify the accuracy of information about the beneficiary or originator of the unhosted wallet”. Regardless of suspicions of criminal activity, companies must make sure to notify “competent AML authorities” about any crypto transfer from an unhosted wallet exceeding 1k EUR. In the case of crypto transactions from unhosted wallets, the logging threshold could be reduced to 0 EUR. After a one-year evaluation, more measures may be implemented.
Council Supports the Banning of Anonymous Crypto Wallets
As with the MiCA regulation, this vote, the first of two, is concerning due to the fact that the member states that make up the Council appear to be on the same page as the EU Parliament regarding the issue of anonymous crypto wallets, suggesting a quicker passage through the next vote and perhaps into law sooner rather than later, Patrick Hansen reports.
From April 1, users transmitting to non-Coinbase wallets in Singapore and Japan must give personal information on the recipient, such as name and address, in accordance with Canada’s version of the FATF Travel Rules.
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