EU lawmakers tighten traceability rules on crypto transfers in fight against money laundering

April 1, 2022

By Sharan Kaur Phillora

European Union lawmakers backed tougher traceability rules for transfers of Bitcoin and other cryptocurrencies, in a move the industry said would erode privacy, hinder innovation and expose users to a higher risk of theft.

Here’s what we know:

Under the proposal, first put forward last year by the European Commission, crypto exchanges would have to obtain, hold, and submit information on those involved in transfers. This information would have to be made available to the competent authorities.

That would make it easier to identify and report suspicious transactions, freeze digital assets, and discourage high-risk transactions, said Ernest Urtasun, a Spanish Green Party lawmaker helping to steer the measure through the parliament.

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

The legislation would also crackdown on so-called “unhosted” wallets – held by individuals, not exchanges – by requiring them to keep records of crypto transactions and notify relevant authorities in the event of a transaction worth €1,000 or more.

In response, Urtasun said that removing the threshold brings the draft law into line with rules from the global Financial Action Task Force that sets standards for combating money laundering. He said an exemption for low-value transfers would not be appropriate, as crypto users could dodge the rules by creating an almost unlimited number of transfers.

The draft legislation, part of a broader fight against money laundering and financial crime, would require crypto firms to collect and share data on transactions in a business that has so far thrived on its anonymity.


About the author

Sharan Kaur Phillora’s thirst for knowledge has led her to study many different subjects, including NFTs and Blockchain technology – two emerging technologies that will change how we interact with each other in the future. When she isn’t exploring a new idea or concept, she enjoys reading literary masterpieces.

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