EU Agrees to Regulate Cryptocurrency Transfers

  • The new rules seek to prevent the anonymity of crypto users and money laundering.
  • However, for its entry into force this reform must be ratified by the European Parliament and the Council.
  • The adoption of these measures seek to harmonize and unify the anti-criminal policies that the member states of the European bloc apply.

The European Union reached an agreement to strengthen control over cryptocurrency operations to prevent anonymous transfers and money laundering. The new rules oblige crypto platforms to collect the data of the sender and receiver of the transferred funds, regardless of the amount of the operation.

The agreement reached on Thursday by the negotiators of the European Parliament and the Council, comes to reinforce the control of operations in an attempt to give greater transparency to the trade of cryptocurrencies and avoid anonymous transfers that facilitate money laundering and the financing of terrorism.

The new rules will still have to be formally approved by the plenary sessions of the European Parliament and the European Council for their implementation. The adoption of this rule called “Travel Rule” was proposed by the FATF (International Financial Action Task Force).

"The new rules will make it easier to investigate certain transfers linked to criminal activities and to identify the real person behind those transactions," said Ernest Urtasun, MEP for En Comú Podem and rapporteur for the European Parliament when referring to this reform of the regulation of transfer of funds.

Obligations of Crypto Operators

Cryptocurrency exchanges and digital wallet service providers (including non-hosted wallets) will have to provide this information to authorities when requested during investigations into criminal activity. Providers must verify transfers to or from their customers.

The approved reform will also “help apply the financial sanctions” imposed by the EU on Russian oligarchs in response to the invasion of Ukraine, the MEP said. So the friends of Vladimir Putin will not be able to circumvent the European and American sanctions by using funds in cryptocurrencies.

To execute these measures and avoid the risks of being circumvented by individuals and criminal groups, crypto companies will have to apply a series of adequate policies, procedures and internal control mechanisms from now on.

Unification of Policies Against Money Laundering

All member states of the community must also align with these new rules and incorporate them into their respective national legislation. In this way, European laws against money laundering and terrorism in these areas can be harmonized and unified.

The agreement provides that the EU undertakes to create a public registry of cryptocurrency service provider companies that violate this regulation. Likewise, it will serve to issue a black list of operators not authorized to operate within the common space shared by the European bloc.

Also, the EU data protection regulation (GDPR) will be applied to the cryptocurrency sector to guarantee that the crypto asset markets adapt these new operating rules to the policies and procedures that apply to their clients.

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