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The EU’s 27 finance ministers of the European Council have agreed on a negotiating mandate for new crypto transfer rules in the trading bloc, bringing travel rule compliance closer for all member states.
The Council’s proposal forms part of a much-lauded package of legislative proposals to strengthen the EU's anti-money laundering and counter-terrorism financing (AML/CTF) rules, which was presented by the European Commission in July.
“Today’s agreement is an important step towards closing the gaps in our financial systems that are malevolently used by criminals to launder unlawful gains or finance terrorist activities,” said Andrej Šircelj, Slovenia’s finance minister, in a statement.
Crypto-assets are more and more at risk of being exploited for money laundering and criminal purposes, Šircelj cautioned. “I’m glad the Council could make swift progress on this urgent proposal.”
Once implemented, the proposal will align EU legislation with key standards of the Financial Action Task Force (FATF), whose member states such as Germany have already done. Germany’s transfer rules came into operation last week.
FATF complained in the summer that implementation of the standard was slow, warning that a lack of global travel rule compliance is holding the private sector back from meeting AML standards for virtual assets.
The aim of the proposal is to introduce an obligation for crypto-asset service providers to collect and make accessible full information about the sender and beneficiary of the transfers of virtual or crypto-assets they operate, in line with what payment service providers currently do for wire transfers.
This ensures traceability of crypto-asset transfers, meaning it is easier to identify possible suspicious transactions and, if necessary, block them.
According to a statement released by the Council, the amendments it is recommending streamline and clarify the European Commission’s proposal, in particular by introducing requirements for crypto-asset transfers between crypto-asset service providers and un-hosted wallets.
It also requires that the full set of originator information travel with the crypto-asset transfer, regardless of the transaction amount.
Given what the Council sees as an urgent need to ensure traceability of crypto-asset transfers, it has tried to align the application of the proposal on the transfer of funds and the Markets in Crypto-Assets regulation (MiCA), which it agreed on an adopted position last week.
FATF’s travel rule has been met with friction from those in the crypto industry. In particular, there are concerns about compliance costs and data privacy.
In May, Blockchain for Europe, a Brussels-headquartered trade association, wrote to the EU’s top national data protection authorities about substantial privacy concerns regarding FATF’s draft guidance for virtual assets and virtual asset service providers (VASPs), warning that it makes a tremendous amount of information accessible to other financial institutions.
